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Chart 1: Gold Stocks vs. Stocks
In this chart we plot two gold stock indices against the S&P 500. The Barron's Gold Mining Index (back to 1939) is at the top while the S&P TSX Gold Index (back to 1928) is at the bottom.
As we can see (or better with the top chart), the ratio is moving lower towards a retest of that epic 2016 low. For the BGMI/S&P, that was an all-time low. For the S&P TSX/Gold, the 2016 low was a tick above the 2000 low. My guess is the ratio will make a higher low in 2018 (which could look like a double bottom on a historical graph) and then rocket higher after that low.
The other takeaway for me, is epic lows in these ratios coincide with major peaks in valuations in US stocks. The three vertical lines show the 3 major historical peaks in the CAPE Ratio. (If we go by median peak, 2007 is the 4th major peak). In any event, both median cape and cape are making another historical, major peak. That bodes extremely favorably for gold stocks over the coming years.
Early Sunday morning we published and sent subscribers TDG #546, a 27-page update which included an updated report on one of our favorite companies. It is a company that ticks all the boxes and did so months ago when it had an enterprise value below US $30 Million. (Currently it is roughly US $65 Million). While the share structure is growing, we see this company reaching a market cap of over $500 Million in the years ahead in a bull market environment. The update also
included notes on three other companies. These things comprise 7 pages of the update.
The short-term outlook is not bullish as the fundamentals are not in place and the technicals argue for a downside break rather than a big rebound. Silver has broken short-term support, as did Gold/foreign currencies. However, the gold stocks are fairly oversold. A push to the downside and a move in Gold below $1260 could setup a rally in the gold stocks in Q1 2018. (They could rally then just from being very oversold). Although we are not expecting the sector to takeoff until
the middle of next year, we do not want to be overly bearish. There are not many sellers left in this market.
If the gold stocks break support then we should get a decent buying opportunity around the holidays. Even if gold stocks don't takeoff until next summer, we can still make great gains if we buy from a low point.
This year we bought 14 "new" positions and below was the peak performance of the winners. (The % gain at the stock's 2017 peak). We only included our initial buy. We added to a few of these. 4 of the 14 hit our 20% loss threshold and we sold. One has not moved much.
12/28- +217%
1/5- Sold- hit 20% loss
1/5- +102%
1/6- +122%
1/18- +Sold- hit 20% loss
1/27- +92%
2/1- +60%
2/2- +Sold- hit 20% loss
2/3- +168%
3/15- +77%
7/24- +299%
8/1- +484%
8/12- +3% currently (hasnt moved much)
8/28- Sold- hit 20% loss
If you exercise patience, buy at opportune times (sector oversold, stock oversold, value, etc), choose the right companies and cut your losses, you can achieve good results. It would be an honor and pleasure to work for you. My subscribers are my lifeblood.
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You nearly always read the trends and support and resistance extremely well. Please keep us posted if or when the outlook seems to change. which you always do of course. TDG is the most valuable resource for understanding what is possible to understand about the PMs.
I am very pleased with your frequent and timely updates, which is so helpful, considering the high volatility and unpredictability of this market. I have subscribed to other analysts which I have to say don't even come close.
I would add that you are moving to the top of my most valuable mining stock/metals advisor list. Your skills at chart reading have improved over the years, to very high levels. Kudos for that. Your advice on capital preservation in this dangerous trading arena are reliable, as well. In the years ahead, I believe you will continue to rise to the top.
I plan to be a lifetime subscriber to your service....I have made a lot of money with your service...especially with Novo which because of your recommendation I was able to acquire at $1.30.
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Thanks for reading. I wish you all great health and prosperity.
-Jordan
Disclaimer: This newsletter is intended for informational and educational purposes only and should not be considered personalized and individualized investment advice. Investment in the precious metals sector contains significant risks. You should consult with an investment advisor and do your own due diligence before making any investment decisions. This email may contain certain forward looking statements which are subject to risks, uncertainties and a multitude of factors that
can cause results and outcomes to differ materially from those discussed herein. Novo Resources has contracted TheDailyGold.com for marketing purposes.
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