JUNIOR GOLD MINERS LEAD RALLY IN PRECIOUS METALS -- PART OF THE REASON IS ITS HEAVIER WEIGHTING IN SILVER STOCKS -- MARKET VECTORS GOLD MINING INDEX CONTINUES TO CLIMB -- BESIDES IAMGOLD, OTHER UPSIDE LEADERS ARE SEABRIDGE AND GAMMON GOLD
PRECIOUS METALS CONTINUE TO CLIMB ... My last two market messages from last week wrote about signs of an upturn in precious metal assets. Signs of an upturn are growing even stronger. Chart 1 show Gold Trust Shares (GLD) trading back over their 20-day average (green line) for the first time this year. The MACD histogram (below chart) has also turned positive. I pointed out last Thursday that Silver Trust (SLV) had already turned positive and was leading gold higher. Chart 2 shows SLV having already cleared its 50-day average (blue line). The SLV:GLD ratio (top of Chart 2) shows that silver has been the stronger of the two commodities (as have most silver stocks). Chart 3 shows Platinum prices (PGM) having already hit a new high. I pointed out that platinum usually trends in the same direction as the other two precious metals, and that its ability to reach a new high was a positive sign for gold and silver. Precious metals stocks are also rallying.
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Chart 1
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Chart 2
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Chart 3
GDX LEADERS ... Last Tuesday's message showed the Market Vectors Gold Miners ETF (GDX) starting to bounce off its 200-day average which was the first sign of improvement in the group. It continues to climb and is nearing a test of its 50-day line. Among individual GDX stocks, I showed IAMGOLD hitting a new record high. Here are a couple more GDX leaders. Chart 2 shows Seabridge Gold (SA) breaking out to a new seven-month high. Chart 3 shows Gammon Gold (GRS) reaching a 10-month high. The GDX includes more than 30 gold and silver stocks that fall mainly into the large cap category (86%). There is a second gold miners ETF that measures smaller stocks. And it's doing even better.
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Chart 4
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Chart 5
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Chart 6
JUNIOR MINERS INDEX CLEARS 50-DAY LINE... As the name implies, the Junior Gold Miners ETF (GDXJ) covers smaller precious metal stocks. That makes it bit more speculative than its senior counterpart. However, that also means that it usually rises faster during an upswing (as do most smaller stocks). Chart 7 shows the GDXJ having already exceeded its 50-day average. Part of the reason for its superior performance has to do with two of its biggest holdings. Allied Nevada Gold Corp (ANV) is the second biggest stock in the junior index and is in the process of challenging its fourth quarter highs (Chart 8). The third biggest holding is a Canadian stock -- European Goldfields Ltd (EGO.TO) -- which has already reached a new record (Chart 9). Another reason for the stronger performance of the junior index is its heavier weighting in silver stocks which have tended to be stronger than most gold shares. One example is Coeur D Alene Mines (CDE) which has also cleared its 50-day line as shown in Chart 10. The biggest holding in the junior index is Hecla Mining (not shown) which is another silver stock testing its 50-day line. By contrast, none of the biggest stocks in the senior gold index have cleared that initial resistance barrier. So it seems that in the case of precious metal stocks, smaller is better at the moment. A second message is that silver (and its related stocks) are generally stronger than gold-related assets. An even broader message is that the entire precious metals group appears to have bottomed.
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Chart 7
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Chart 8
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Chart 9
