DiscoverGold
1 day ago
Gold Miners’ Epic Quarter
By: Adam Hamilton | October 11, 2024
The gold miners are on the verge of reporting another best quarter ever. Q3’s earnings season ramping up soon will prove epic, fueled by dazzling record gold prices and slightly-lower mining costs. That ought to double sector unit profits, extending gold stocks’ long trend of massive earnings growth. Such fantastic results should increasingly catch fund investors’ attention, with their inflows driving this sector way higher.
Gold stocks remain out of favor, greatly lagging gold’s monster upleg over this past year. This has proven one of gold’s mightiest advances in many years, soaring 46.8% over 11.7 months! Historically larger gold miners dominating the leading GDX gold-stock ETF have seen their stock prices amplify gold uplegs by 2x to 3x. Yet instead of seeing normal 95%- to-140% upleg gains, GDX has merely rallied 60.7% at best!
That very-poor 1.3x upside leverage to gold has been a real kick in the teeth for contrarian speculators and investors. Gold stocks need to way outperform their metal to compensate for the big additional operational, geological, and geopolitical risks they heap on top of gold price trends. Yet so far that sure hasn’t happened in this upleg, leaving traders increasingly disappointed with this lucrative high-potential sector.
Two major factors contributed to this surprising anomaly. First gold-stock sentiment was crushed in mid-2022 and hasn’t recovered. Then the Fed’s most-violent rate-hike cycle ever catapulted the US Dollar Index up an incredible 16.7% in 6.0 months to an extreme 20.4-year secular peak! That spawned colossal gold-futures selling, slamming gold 20.9% lower in 6.6 months. GDX cratered a brutal 46.5% during that!
Second while gold blasted up 26.4% year-to-date, traders have been overwhelmingly distracted by the AI stock bubble. While gold achieved 35 nominal-record closing highs so far this year, the S&P 500 bested that with a whopping 44 of its own! Gold and gold stocks are alternative investments, thriving the most when general stock markets grind lower. Instead they’ve been surging, spinning off vast greed and euphoria.
But sooner or later all that will pass, and gold stocks will be bid way higher to reflect these lofty prevailing gold prices. The gold miners’ phenomenal fundamentals overwhelmingly support this bullish thesis. For 33 quarters in a row now, I’ve painstakingly analyzed the latest results reported by GDX’s 25-biggest component stocks. Right after each quarterly earnings season, I write essays explaining how they are performing.
Across individual gold miners, there are always plenty of distorted bottom-line earnings. These include big noncash gains and losses arising from unusual items ranging from acquisitions to impairment charges. But that noise can be distilled out with an excellent proxy for sector unit profits. It simply averages the GDX top 25’s all-in sustaining costs in any quarter, then subtracts them from its average gold price.
These implied per-ounce profits have been skyrocketing, leaving gold stocks deeply undervalued relative to their metal. A year ago in Q3’23, the GDX top 25 reported $622 in unit earnings which soared 94% YoY. Then in Q4’23, those grew again to $659 per ounce which shot up another 42% YoY. That trend persisted in Q1’24, with these major gold miners averaging earning $795 per ounce which powered up 35% YoY.
Then all that accelerated dramatically in the spectacular Q2’24, which I analyzed in depth in a mid-August essay. That quarter’s record average gold price of $2,337 combined with GDX-top-25 AISCs plunging 10.2% YoY to $1,239 catapulted unit earnings to a dazzling record $1,099! That blasted up another 84% YoY. So miners’ last four reported quarters have seen per-ounce profits soar 94%, 42%, 35%, and 84% YoY!
Such explosive profits growth has naturally slammed gold miners’ price-to-earnings ratios dramatically lower, into the teens and even single digits in some cases. With fantastically-bullish fundamentals like this, you’d think traders would be rushing into this high-potential sector. But gold stocks remain mired in apathy, lost in the shadow of this crazy AI stock bubble stealing all the limelight. Yet its days are numbered.
Eventually stock prices always mean revert to some reasonable multiple of underlying corporate earnings. Market-darling AI stocks can’t trade with 60x+ P/Es indefinitely, and good gold stocks can’t remain at sub-15x multiples. Sooner or later some catalyst will spark overdue capital flows to start normalizing all this. It could be the AI stock bubble finally bursting and decisively rolling over, it could prove gold surging even higher.
But maybe the gold miners will stack enough sensational earnings seasons to convince fund managers to return. Their relatively-big buying in this relatively-small sector will drive stock prices way higher, which will eventually fuel greed, euphoria, and maybe even a popular speculative mania. Gold stocks are about to report absolutely-epic Q3 results, their best ever achieved by far! That could prove this sector’s tipping point.
Q3’24’s average gold price soared an amazing 28.6% YoY to a new all-time record $2,477! This is utterly stunning considering just a year ago that highwater mark had been $1,978. Gold’s phenomenal prices last quarter were fueled by major buying from gold-futures speculators, central banks around the world, Chinese investors, and a huge surge in Indian gold imports. I could write entire essays discussing each.
But today realize Q3’s record gold levels have been set in stone, they can’t be revised lower like Biden Administration jobs reports. So the only variable driving sector unit profitability is the GDX top 25’s average all-in sustaining costs. Over the past four quarters they have been trending lower on balance, clocking in at $1,304, $1,317, $1,277, and $1,239 per ounce. That averages $1,284, a conservative baseline.
The majority of these elite major gold miners provide and update AISC guidance throughout the year. And many of them are forecasting higher production and thus lower mining costs in H2’24 compared to H1. Gold mining has massive fixed costs, which growing output spreads across more ounces reducing unit costs. A surprising number of major gold miners continued guiding to considerably-lower costs in Q3 and Q4.
The world’s largest gold miner and GDX’s biggest component by far with a huge 14.6% weighting is a great example. In Q1 and Q2, Newmont reported AISCs of $1,439 and $1,562 per ounce. That averaged a little over $1,500 in H1. Yet in late July NEM reaffirmed its full-year-2024 AISC guidance at just $1,400 per ounce. Unlike most of its peers, Newmont didn’t even give a range. And its 2024 output was H2-weighted.
Back in late February this super-major forecast 47% of this year’s production would come in H1, then 53% in H2. That alone is going to force AISCs lower. To hit that $1,400 AISC target for all of 2024, Q3’s and Q4’s would have to average just $1,300! That is sharply lower from Q1’s and Q2’s, and would make for a big improvement. We are talking about H2 AISCs plunging 13%+ from H1 levels, which would be amazing.
While I really doubt NEM will achieve such low Q3 and Q4 AISCs, they will definitely materially improve. And there are plenty of other GDX-top-25 majors with similar much-better-mining-cost forecasts for H2 compared to H1. Collectively these elite gold miners averaged $1,258 AISCs in H1’24. It seems pretty conservative to imagine them improving 2%ish in this soon-to-be-reported Q3, which would be near $1,230.
We won’t know what the actual average is until Q3 earnings season ends in mid-November, after which I’ll write another essay fully analyzing those collective results. But if GDX-top-25 AISCs come in around $1,230, subtracted from Q3’s phenomenal $2,477 average gold price that yields implied sector profits of $1,247 per ounce! That would crush Q2’24’s previous record of $1,099, and skyrocket over 100% YoY!
You’d sure think a doubling in gold miners’ already-massive profits would impress some fund managers, motivating them to add gold-stock positions. But even if GDX-top-25 Q3 AISCs come in way higher for some reason, profitability is still going to soar. Even if those average AISCs prove much worse up near $1,350, Q3’s unit earnings would still soar 81% YoY to a new record $1,127. Those profits will prove epic.
Crazily due to this AI stock bubble and funds dangerously concentrated in a handful of wildly-overcrowded AI plays, American stock investors’ overall allocations to gold are effectively zero. Entering October, the S&P 500 stocks collectively commanded a staggering $51,247b market capitalization. Yet the combined holdings of the world-dominant American GLD and IAU gold ETFs were merely worth $106b that same day.
That implies a trivial 0.2% gold allocation, despite gold’s record-shattering year! That should be 5% to 10%, since gold has always been an essential portfolio diversifier. Even if it grows to 1%, gold is heading way higher. And fund managers’ allocations to gold miners’ stocks are similarly-tiny. At some point gold miners’ earnings will grow so fat and rich that their stocks can no longer be ignored, and capital inflows will soar.
While the major gold stocks’ imminent Q3 results are going to be jaw-droppingly awesome, this sector does face a near-term speedbump. Gold stocks leverage gold, and it faces high selloff risks during coming weeks. My essay last week analyzed this in depth. Gold simply blasted too far too fast to extremely-overbought levels driven by heavy gold-futures buying, leaving speculators’ positioning extreme.
But despite gold growing really overextended, gold stocks are not since they have lagged their metal so much this year. This chart divides GDX by its own 200-day moving average, creating an overbought-and-oversold indicator I call the Relative GDX. This renders gold-stock moves in constant-percentage terms around a 200dma flattened to horizontal at 1.00x. Over time this rGDX indicator tends to form trading ranges.
The current one based on the last five years of data runs from extremely-oversold levels under 0.75x GDX’s 200dma to extremely-overbought ones over 1.30x. Unlike its metal, GDX still hasn’t yet reached the latter warning levels in this year-long upleg! At the major gold stocks’ latest interim high achieved in late September, the rGDX was merely running 1.249x! Gold stocks don’t need to fully amplify gold’s selloff.
Of course they will to some extent, as they are leveraged plays on the metal they mine. At worst since its latest interim high, gold has pulled back 2.4% as of midweek. GDX did fall 6.8% in that span, making for 2.9x downside leverage on the higher side of that usual 2x-to-3x range. But that ought to moderate since gold stocks remain really undervalued after seriously lagging gold’s powerful advance, as precedent shows.
Gold’s last healthy mid-upleg pullback ran from late May to early June, when it dropped 5.7% rebalancing sentiment. During that span gold bled off excessive greed, GDX only retreated 10.0% making for mere 1.8x downside leverage! Any coming gold-stock downside on another gold pullback should prove relatively-muted as well. The gold stocks never challenged extreme overboughtness, and popular greed never flared.
If gold pulling back forces a gold-stock selloff ahead of or into Q3 earnings, that should prove an excellent buying opportunity. Mid-upleg pullbacks offer the best buy-relatively-low opportunities within ongoing bull-market uplegs. We ratcheted up trailing stop losses on our newsletter gold-stock trades preparing for a retreat, and I’m researching fundamentally-superior mid-tiers and juniors to buy into as it runs its course...
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DiscoverGold
7 days ago
NY Gold Futures »» Weekly Summary Analysis
By: Marty Armstrong | October 5, 2024
NY Gold Futures closed today at 26678 and is trading up about 28% for the year from last year's settlement of 20718. Factually, this market has been rising for 11 months going into October suggesting that this has been a bull market trend on the monthly time level which has been confirmed by electing all of our model's long-term Bullish Reversals from the key low.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Gold Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2022 and 2015. The Last turning point on the ECM cycle high to line up with this market was 2020 and 2011 and 1996.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The NY Gold Futures has continued to make new historical highs over the course of the rally from 2015 moving into 2024. However, this last portion of the rally has taken place over 9 years from the last important low formed during 2015. Distinctly, we have elected four Bullish Reversals to date.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Solely focusing on only the indicating ranges on the Daily level in the NY Gold Futures, this market remains moderately bullish currently with underlying support beginning at 26653 and overhead resistance forming above at 26947. The market is trading closer to the support level at this time. An opening below this level in the next session will imply a decline is unfolding.
On the weekly level, the last important high was established the week of September 23rd at 27087, which was up 16 weeks from the low made back during the week of June 3rd. Afterwards, the market bounced for 16 weeks reaching a high during the week of September 23rd at 26386. Since that high, we have been generally trading down to sideways for the past week, which has been a reasonable move of 2.307% in a reactionary type decline. Nonetheless, the market still has not penetrated that previous low of 23042 as it has fallen back reaching only 26462 which still remains 14.84% above the former low.
When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 27087 made 1 week ago. Still, this market is within our trading envelope which spans between 23206 and 27368. The broader perspective, this current rally into the week of September 23rd has exceeded the previous high of 25704 made back during the week of August 19th. This immediate decline has thus far held the previous low formed at 23042 made the week of June 3rd. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals.
Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend, and cyclical strength. From a pointed viewpoint, this market has been trading down for the past week.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2020 while the last low formed on 2023. However, this market has rallied in price with the last cyclical high formed on 2023 and thus we have a divergence warning that this market is starting to run out of strength on the upside.
Interestingly, the NY Gold Futures has been in a bullish phase for the past 22 months since the low established back in November 2022.
Critical support still underlies this market at 23030 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Immediately, the market is trading within last month's trading range in a neutral position.
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DiscoverGold
2 weeks ago
NY Gold Futures »» Weekly Summary Analysis
By: Marty Armstrong | September 28, 2024
NY Gold Futures closed today at 26681 and is trading up about 28% for the year from last year's settlement of 20718. Caution is required for this market is starting to suggest it may now decline on the MONTHLY level. Currently, this market has been rising for 10 months going into September suggesting that this has been a bull market trend on the monthly time level which has been confirmed by electing all of our model's long-term Bullish Reversals from the key low. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 27087 while it has not broken last month's low so far of 24038. Nevertheless, this market is still trading above last month's high of 25704.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Gold Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2022 and 2015. The Last turning point on the ECM cycle high to line up with this market was 2020 and 2011 and 1996.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The NY Gold Futures has continued to make new historical highs over the course of the rally from 2015 moving into 2024. However, this last portion of the rally has taken place over 9 years from the last important low formed during 2015. Noticeably, we have elected four Bullish Reversals to date.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Pay attention to the Monthly level for any serious change in long-term trend ahead.
From a perspective using the indicating ranges on the Daily level in the NY Gold Futures, this market remains moderately bullish currently with underlying support beginning at 26510 and overhead resistance forming above at 26894. The market is trading closer to the support level at this time.
On the weekly level, the last important high was established the week of September 23rd at 27087, which was up 16 weeks from the low made back during the week of June 3rd. So far, this week is trading within last week's range of 27087 to 26386. Nevertheless, the market is still trading downward more toward support than resistance. A closing beneath last week's low would be a technical signal for a correction to retest support.
When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 27087 made 0 week ago. This market has made a new historical high this past week reaching 27087. Here the market is trading weak gravitating more toward support than resistance. We have technical support lying at 26839 which we are currently trading below implying the market is very weak. This infers that this level will now be resistance. Our Major Channel Support lies at 25445 and a break of that level would be a bearish indication for this market.
Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend, and cyclical strength. Looking at this from a wider perspective, this market has been trading up for the past 3 weeks overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2020 while the last low formed on 2023. However, this market has rallied in price with the last cyclical high formed on 2023 and thus we have a divergence warning that this market is starting to run out of strength on the upside.
Interestingly, the NY Gold Futures has been in a bullish phase for the past 21 months since the low established back in November 2022.
Critical support still underlies this market at 22840 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Nevertheless, the market is trading above last month's high showing some strength.
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DiscoverGold
2 weeks ago
Gold Stocks Forge Higher
By: Adam Hamilton | September 27, 2024
The gold miners’ stocks are forging higher, just achieving their best levels in four years. While advancing, their upside progress has certainly been labored. Given gold’s monster upleg and dazzling record highs, gold stocks should be much higher. And their record profits and epic earnings growth sure support way-better stock prices. The main impediment is traders’ apathetic sector sentiment, but that is starting to shift.
The leading GDX gold-stock index has surged 7.2% at best this month, closing at $41.41 Tuesday. That proved major gold stocks’ highest levels in 3.9 years. And if GDX can best the $44.48 it hit a few months earlier in August 2020, we’d be looking at 11.7-year secular highs! Since early October 2023, this GDX upleg has powered up 59.8%. That’s trouncing broader stock markets, with the S&P 500 up 34.5% in that span.
With great performance like that over this past year, you’d think gold stocks would be growing popular. But they really aren’t. Mainstream investors still aren’t the least-bit interested in chasing this sector’s strong upside momentum. They’re still enamored with the AI stock bubble, which continues to steal all the market limelight. And contrarian investors like me who follow gold stocks are pretty disappointed in them.
Gold stocks are ultimately leveraged plays on the metal they mine. The gold-mining business heaps big additional operational, geological, and geopolitical risks on top of gold price trends. So gold stocks really need to outperform gold to justify deploying capital in them. Historically the major-dominated GDX has generally leveraged material gold moves by 2x to 3x. That kind of amplification makes gold stocks worth owning.
Unfortunately they’ve way underperformed long decades of precedent over this past year. GDX’s 59.8% upleg sounds good, but gold itself has enjoyed a monster 46.3% upleg in that timeframe! That means the major gold stocks have only clocked in with 1.3x upside leverage to their metal. At that usual 2x to 3x, this GDX upleg should already be up 93% to 139% given gold’s massive gains! Gold stocks are way behind.
That doesn’t mean they won’t catch up with gold, which can happen fast. Compared to the vast pools of stock-market capital, this contrarian sector is vanishingly-small. So even tiny shifts in capital flows can catapult gold stocks far higher in short order. During gold’s last 40%+ upleg cresting in August 2020, that last time GDX was higher, GDX had rocketed up 134.1% in only 4.8 months! Gold stocks aren’t out of the race.
After actively trading this high-potential contrarian sector publicly for a quarter-century now, I’ve seen plenty of times where gold stocks were mostly ignored. Sooner or later investors always return, resulting in huge gains. Doublings in under a year aren’t uncommon, gold stocks can really multiply wealth when they are running! Another doubling or more is coming as gold stocks mean revert way higher to reflect gold.
That will be driven by a major bullish sentiment shift, resulting from gold’s massive gains and impressive parade of nominal record highs. The gold miners’ colossal earnings generated at these high gold prices fundamentally justify way-higher stock prices. Before we delve into all that, this chart puts GDX technical action in recent years into perspective. The gold stocks’ latest secular high is marginal, they are forging ahead.
Interestingly despite vexingly lagging gold this past year, gold-stock doublings are still a thing. Since this secular gold bull was born in late September 2022, GDX has powered up 89.3%. That compares to gold’s +64.0% at best in that span, making for modestly-better 1.4x upside leverage. Yet driven by gold-stock sentiment, sector performance can turn on a dime. GDX would only need a couple months to fully catch up.
The dominant driver of gold-stock psychology is how gold is faring. And that is awesome right now, achieving five new record closes in August followed by another seven so far in September! Closing way up near $2,662 Tuesday, such fantastic gold levels were almost unimaginable just one year ago. The longer and higher gold rallies, the more investors and speculators will want to chase it including with gold stocks.
New record highs in particular fuel virtuous circles of buying. The higher gold goes, the more the financial media covers it and the more bullish their coverage gets. That elevates gold and by extension its miners’ stocks onto more investors’ radars, including fund managers. The more buying they do, the more gold and gold-stock gains mount. That generates more bullish commentary attracting in widening circles of investors...
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DiscoverGold
DiscoverGold
1 month ago
NY Gold Futures »» Weekly Summary Analysis
By: Marty Armstrong | August 31, 2024
Next Monday is Labor Day, which is a holiday in the United States. NY Gold Futures closed today at 25276 and is trading up about 22% for the year from last year's settlement of 20718. Caution is required for this market is starting to suggest it may now decline on the MONTHLY level. Presently, this market has been rising for 10 months going into September suggesting that this has been a bull market trend on the monthly time level which has been confirmed by electing all of our model's long-term Bullish Reversals from the key low.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Gold Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2022 and 2015. The Last turning point on the ECM cycle high to line up with this market was 2020 and 2011 and 1996.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The NY Gold Futures has continued to make new historical highs over the course of the rally from 2015 moving into 2024. However, this last portion of the rally has taken place over 9 years from the last important low formed during 2015. We have elected four Bullish Reversals to date.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Pay attention to the Monthly level for any serious change in long-term trend ahead.
From a perspective using the indicating ranges on the Daily level in the NY Gold Futures, this market remains moderately bullish currently with underlying support beginning at 25198 and overhead resistance forming above at 25385. The market is trading closer to the support level at this time.
On the weekly level, the last important high was established the week of August 19th at 25704, which was up 11 weeks from the low made back during the week of June 3rd. Afterwards, the market bounced for 11 weeks reaching a high during the week of August 19th at 25064. Since that high, we have been generally trading down to sideways for the past week, which has been a reasonable move of 1.704% in a reactionary type decline. Nonetheless, the market still has not penetrated that previous low of 23042 as it has fallen back reaching only 25266 which still remains 9.651% above the former low.
When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 25704 made 1 week ago. Still, this market is within our trading envelope which spans between 21978 and 26480. The broader perspective, this current rally into the week of August 19th has exceeded the previous high of 24884 made back during the week of July 15th. This immediate decline has thus far held the previous low formed at 23042 made the week of June 3rd. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals.
Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend, and cyclical strength. Looking at this from a wider perspective, this market has been trading up for the past 6 weeks overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2020 while the last low formed on 2023. However, this market has rallied in price with the last cyclical high formed on 2023 and thus we have a divergence warning that this market is starting to run out of strength on the upside.
Interestingly, the NY Gold Futures has been in a bullish phase for the past 21 months since the low established back in November 2022.
Critical support still underlies this market at 22840 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Immediately, the market is trading within last month's trading range in a neutral position.
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DiscoverGold
2 months ago
Gold Mid-Tiers’ Q2’24 Fundamentals
By: Adam Hamilton | August 23, 2024
The mid-tier and junior gold miners in this sector’s sweet spot for upside potential just finished reporting truly-spectacular quarterly results. Fueled by dazzling record gold prices and lower mining costs, smaller gold miners’ unit earnings skyrocketed to their highest levels ever. Those incredibly-rich profits have left mid-tiers even more undervalued relative to prevailing gold prices, portending massive catch-up rallying.
The leading mid-tier-gold-stock benchmark is the GDXJ VanEck Junior Gold Miners ETF. With $5.5b in net assets mid-week, it remains the second-largest gold-stock ETF after its big brother GDX. That is dominated by far-larger major gold miners, though there is much overlap between these ETFs’ holdings. Still misleadingly named, GDXJ is overwhelmingly a mid-tier gold-stock ETF with juniors having little weighting.
Gold-stock tiers are defined by miners’ annual production rates in ounces of gold. Small juniors have little sub-300k outputs, medium mid-tiers run 300k to 1,000k, large majors yield over 1,000k, and huge super-majors operate at vast scales exceeding 2,000k. Translated into quarterly terms, these thresholds shake out under 75k, 75k to 250k, 250k+, and 500k+. Today only three of GDXJ’s 25 biggest holdings are true juniors!
Their Q2 outputs are highlighted in blue in the table below. Juniors not only mine less than 75k ounces per quarter, but their gold output generates over half their quarterly revenues. That excludes streaming and royalty companies that purchase future gold output for big upfront payments used to finance mine-builds, and primary silver miners producing byproduct gold. But mid-tiers often make better investments than juniors.
These gold miners dominating GDXJ offer a unique mix of sizable diversified production, excellent output-growth potential, and smaller market capitalizations ideal for outsized gains. Mid-tiers are less risky than juniors, while amplifying gold uplegs more than majors. So we’ve long specialized in the fundamentally-superior mid-tiers and juniors at Zeal, actively trading these smaller gold miners for a quarter-century now.
All 1,510 newsletter stock trades realized as of Q2’24 averaged +15.6% annualized gains, about double the long-term stock-market average! And that’s heading higher, after early August’s Japanic fear spike stopped out more trades with big realized gains. We’ve been refilling our newsletter trading books since, as gold-stock prices remain way too low relative to their phenomenal fundamentals at lofty prevailing gold levels.
GDXJ’s latest upleg has powered 59.2% higher at best over 9.4 months into mid-July. That’s still modest by historical precedent, and smaller gold miners’ gains really accelerate later in gold uplegs. The longer and higher gold climbs, the more bullish sentiment that fuels which attracts back traders to chase big gold-stock gains. Eventually a psychological tipping point is reached and that buying becomes self-feeding.
For 33 quarters in a row now, I’ve painstakingly analyzed the latest operational and financial results from GDXJ’s 25-largest component stocks. Mostly mid-tiers, they now account for 65.6% of this ETF’s total weighting. While digging through quarterlies is a ton of work, understanding smaller gold miners’ latest fundamentals really cuts through the obscuring sentiment fogs shrouding this sector. This research is essential.
This table summarizes the GDXJ top 25’s operational and financial highlights during Q2’24. These gold miners’ stock symbols aren’t all US listings, and are preceded by their rankings changes within GDXJ over this past year. The shuffling in their ETF weightings reflects shifting market caps, which reveal both outperformers and underperformers since Q2’23. Those symbols are followed by their recent GDXJ weightings.
Next comes these gold miners’ Q2’24 production in ounces, along with their year-over-year changes from the comparable Q2’23. Output is the lifeblood of this industry, with investors generally prizing production growth above everything else. After are the costs of wresting that gold from the bowels of the earth in per-ounce terms, both cash costs and all-in sustaining costs. The latter help illuminate miners’ profitability.
That’s followed by a bunch of hard accounting data reported to securities regulators, quarterly revenues, earnings, operating cash flows, and resulting cash treasuries. Blank data fields mean companies hadn’t disclosed that particular data as of the middle of this week. The annual changes aren’t included if they would be misleading, like comparing negative numbers or data shifting from positive to negative or vice-versa.
Weeks before Q2 earnings season even began, I predicted last quarter would prove gold miners’ most-profitable ever in a late-June essay on “Gold Miners’ Record Quarter”. But despite my high expectations, the smaller gold miners’ epic Q2 performances exceeded them! This still-mostly-unloved sector is firing on all cylinders. Yet the vast majority of traders remain unaware, leaving massive room to chase this bull.
The GDXJ top 25 experienced some major composition changes over the past year, with five smaller gold miners rocketing up into these elite ranks. All are mid-tier and junior producers, which usually have way-better fundamentals than streamers, royalty companies, and explorers. So GDXJ is becoming purer as traders bid better producers’ stocks much higher, increasing this ETF’s upside leverage to higher gold prices.
These GDXJ-top-25 stocks are mostly an expanded subset of the GDX-top-25 majors. I analyzed their new Q2 results in last week’s essay, which were also awesome yet still not as impressive as GDXJ’s. These GDXJ-top-25 stocks representing 65.6% of this ETF are also collectively weighted at 25.3% in GDX. GDXJ effectively lops off GDX’s nine largest holdings, which are mostly deadweight super-majors.
Those gigantic gold miners perpetually struggle to overcome depletion at the vast scales they operate. So their output generally shrinks, except for four quarters after expensive acquisitions. Their extensive stables of mines also tend to have higher costs, making for lower profitability. And because of far-larger market capitalizations, super-majors’ stocks are much harder to bid higher during major gold uplegs.
Production growth trumps everything else as the primary mission for gold miners. Higher outputs boost operating cash flows which help fund mine expansions, builds, and purchases, fueling virtuous circles of growth. Mining more gold also boosts profitability, lowering unit costs by spreading big fixed operational expenses across more ounces. The GDXJ top 25 eked out 0.4%-YoY output growth to 2,937k ounces in Q2.
While small, that extended mid-tiers’ production-growth streak to eight of the last nine quarters! That’s quite impressive, especially compared to the GDX majors’ overall output sliding lower for six quarters in a row now. The big composition changes in GDXJ’s upper ranks didn’t affect that comparison much. Also in the comparable Q2’23, South Africa’s Harmony Gold and China’s Zhaojin Mining hadn’t reported results yet...
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DiscoverGold
2 months ago
Gold Miners' Performance vs. Gold -- Does It Say Sell Gold?
By: Carl Swenlin | August 22, 2024
In Monday's DecisionPoint Trading Room video, we were asked why we cover Gold Miners (GDX) as well as Gold (GLD). There are two reasons:
1. Some people prefer to own the commodity, Gold, and others prefer to own an operating company that benefits from the price of Gold, such as Gold Miners. For a profitable mining company, when Gold increases in value, most of the increase goes straight to the bottom line because cost of goods is already paid for.
2. Other people prefer Gold Miners because they may pay a dividend, and typically they out-perform Gold by a lot. That applies to movement in both directions. That is to say, Gold Miners will typically go up faster than Gold, but Miners also go down a lot faster than Gold.
This morning, I heard a money manager who asserted that people who own Gold should be selling it because, while Gold has been making all-time highs, Gold Miners need to advance another +50% to equal its 2011 all-time highs. The chart confirms that, but there is more to consider in this regard.
Here is a performance chart comparing the two from the 2011 top to the present, and we can see that GDX has underperformed GLD by about half.
But let's look at just the decline from the 2011 top to the 2015 lows. We can see that GDX fell at an accelerated rate, driven by the negative sentiment associated with GLD's decline.
The chart showing the performance from the 2015 lows shows that GDX has out-performed GLD by a lot, as we would expect; however, GDX took a -45% hit in 20 because of the securities bear market. Also, GLD had a rather tedious two-year sideways episode in 2020 to 2022, which would have been uninspiring to potential Miners investors. Nevertheless, GDX is still out-performing GLD by a considerable amount.
Conclusion: While the assertion that GDX underperformance since the 2011 all-time high justifies avoiding Gold, I think the premise does not consider all the evidence. Most important was the 2022 hit, which drove GDX down over -2.5 times more than GLD. That had less to do with Gold's prospects than it did with general bear market panic.
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DiscoverGold
2 months ago
NY Gold Futures »» Weekly Summary Analysis
By: Marty Armstrong | August 17, 2024
NY Gold Futures closed today at 25378 and is trading up about 22% for the year from last year's settlement of 20718. Factually, this market has been rising for 9 months going into August suggesting that this has been a bull market trend on the monthly time level which has been confirmed by electing all of our model's long-term Bullish Reversals from the key low. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 25483 while it has not broken last month's low so far of 23274. Nevertheless, this market is still trading above last month's high of 24966.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Gold Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2022 and 2015. The Last turning point on the ECM cycle high to line up with this market was 2020 and 2011 and 1996.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The NY Gold Futures has continued to make new historical highs over the course of the rally from 2015 moving into 2024. However, this last portion of the rally has taken place over 9 years from the last important low formed during 2015. We have elected four Bullish Reversals to date.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Pay attention to the Monthly level for any serious change in long-term trend ahead.
From a perspective using the indicating ranges on the Daily level in the NY Gold Futures, this market remains in a bullish position at this time with the underlying support beginning at 25173.
On the weekly level, the last important high was established the week of August 12th at 25483, which was up 10 weeks from the low made back during the week of June 3rd. So far, this week is trading within last week's range of 25483 to 24627. Nevertheless, the market is still trading upward more toward resistance than support. A closing beneath last week's low would be a technical signal for a correction to retest support.
When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 25483 made 0 week ago. This market has made a new historical high this past week reaching 25483. Here the market is trading positive gravitating more toward resistance than support. We have technical support lying at 24996 which we are still currently trading above for now.
Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend, and cyclical strength. Looking at this from a wider perspective, this market has been trading up for the past 1 week overall.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2020 while the last low formed on 2023. However, this market has rallied in price with the last cyclical high formed on 2023 and thus we have a divergence warning that this market is starting to run out of strength on the upside.
Interestingly, the NY Gold Futures has been in a bullish phase for the past 20 months since the low established back in November 2022.
Critical support still underlies this market at 22480 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Nevertheless, the market is trading above last month's high showing some strength.
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DiscoverGold
2 months ago
Gold Miners’ Q2’24 Fundamentals
By: Adam Hamilton | August 16, 2024
The major gold miners just reported their best quarterly results ever! Record gold prices combined with lower mining costs catapulted unit earnings to dazzling new records. Yet despite exploding profitability, gold stocks continue to lag gold’s mighty upleg. This anomaly won’t last, as investors increasingly realize how seriously undervalued this sector remains. The resulting capital inflows will drive gold stocks way higher.
The GDX VanEck Gold Miners ETF remains this sector’s dominant benchmark. Birthed way back in May 2006, GDX has parlayed its first-mover advantage into an insurmountable lead. Its $14.0b of net assets mid-week dwarfed the next-largest 1x-long major-gold-miners ETF by nearly 25x! GDX is undisputedly the trading vehicle of choice in this sector, with the world’s biggest gold miners commanding most of its weighting.
Gold-stock tiers are defined by miners’ annual production rates in ounces of gold. Small juniors have little sub-300k outputs, medium mid-tiers run 300k to 1,000k, large majors yield over 1,000k, and huge super-majors operate at vast scales exceeding 2,000k. Translated into quarterly terms, these thresholds shake out under 75k, 75k to 250k, 250k+, and 500k+. Those two largest categories account for nearly 4/7ths of GDX.
While GDX’s overall Q2’24 performance remained weak, it is improving. Last quarter this leading gold-stock ETF climbed 7.3% on a 4.7% gold rally, for 1.6x upside leverage. Normally the major gold miners of GDX amplify material gold moves by 2x to 3x. With gold and gold-stock gains mounting, traders are starting to take notice. In Q1 GDX had only edged up 2.0% on a 7.6% gold surge, for dreadful 0.3x leverage.
As a little contrarian sector usually overlooked, gold stocks have to achieve amazing feats before they win investors’ respect and capital. So they tend to underperform earlier in gold bulls, but way outperform later once they are well-established. Gold’s latest upleg has already powered up into mighty territory, rallying a massive 35.8% at best since early October! Gold just achieved its latest nominal record of $2,472 this week.
Gold’s hefty gains have certainly driven GDX higher, with its own upleg climbing 51.6% at best within this same span. But so far that has only amplified gold a still-anemic 1.4x, which is unusual well into a major gold upleg achieving new record-high streaks. The gold stocks remain fantastic buys relatively late in gold’s powerful run thanks to this unsustainable anomaly. Past precedent agues way-bigger gains are coming.
Gold’s last two uplegs attaining new records both crested in 2020, averaging monster 41.4% gains. GDX leveraged those by a good 2.5x, averaging 105.4% gains during them! Yet major gold stocks are up less than half that in today’s similarly-mighty gold upleg. They’ll catch up, so gold stocks remain a heck of an opportunity. Their glorious record Q2 results should really up sector interest among institutional investors.
For 33 quarters in a row now, I’ve painstakingly analyzed the latest operational and financial results from GDX’s 25-largest component stocks. Mostly super-majors, majors, and larger mid-tiers, they dominate this ETF at 87.5% of its total weighting! While digging through quarterlies is a ton of work, understanding the gold miners’ latest fundamentals really cuts through the obscuring sentiment fogs shrouding this sector.
This table summarizes the operational and financial highlights from the GDX top 25 during Q2’24. These gold miners’ stock symbols aren’t all US listings, and are preceded by their rankings changes within GDX over this past year. The shuffling in their ETF weightings reflects shifting market caps, which reveal both outperformers and underperformers since Q2’23. Those symbols are followed by their current GDX weightings.
Next comes these gold miners’ Q2’24 production in ounces, along with their year-over-year changes from the comparable Q2’23. Output is the lifeblood of this industry, with investors generally prizing production growth above everything else. After are the costs of wresting that gold from the bowels of the earth in per-ounce terms, both cash costs and all-in sustaining costs. The latter help illuminate miners’ profitability.
That’s followed by a bunch of hard accounting data reported to securities regulators, quarterly revenues, earnings, operating cash flows, and resulting cash treasuries. Blank data fields mean companies hadn’t disclosed that particular data as of the middle of this week. The annual changes aren’t included if they would be misleading, like comparing negative numbers or data shifting from positive to negative or vice-versa.
At the end of June a few weeks before Q2’s earnings season even started, I wrote an essay called “Gold Miners’ Record Quarter”. I concluded then “...gold miners will soon report a record quarter. ... Amazingly major gold miners’ average Q2 profits are now tracking over an unprecedented $1,000 per ounce.” That indeed came to pass, well exceeding even my high expectations of “awesome unit profits of $1,013 per ounce!”
Before we get to the fantastic news, the major gold stocks’ Q2 output disappointed. Production growth trumps everything else as the primary mission for gold miners. Higher outputs boost operating cash flows which help fund mine expansions, builds, and purchases, fueling virtuous circles of growth. Mining more gold also boosts profitability, lowering unit costs by spreading big fixed operational expenses across more ounces.
Ominously the GDX-top-25 gold majors’ collective production plunged 7.8% YoY to just 7,465k ounces last quarter! That drop was the second-worst in this research thread, to the lowest levels seen in its entire long 33-quarter span! These elite gold miners way underperformed their smaller peers, as the World Gold Council’s comprehensive Q2 gold supply-and-demand data showed global mining output climbing 3.3% YoY.
Thankfully this is all due to lazy quarterly reporting. GDX includes super-major and major South African and Chinese gold miners. The former report in half-year increments, but on a more-relaxed schedule than American and Canadian gold miners. The latter only haphazardly report in English, and when they deign to their scant results can be delayed for many months. Q2’24 reporting proved even worse than usual.
South Africa’s Gold Fields didn’t release any Q2 results as of mid-week, which is atypical. Normally it at least publishes quarterly updates by now, if not full half-year results. GFI’s management has probably been distracted by their new buyout of Canada’s Osisko Mining, to consolidate ownership in a great gold deposit they jointly own. South Africa’s Harmony Gold’s fiscal year ends in Q2, so that report is always later.
China’s Zijin Mining and Zhaojin Mining haven’t reported any Q2 results yet either. Occasionally they put out something in the normal quarter-end reporting window, but mostly not. In the comparable Q2’23, the super-majors Zijin and Gold Fields had reported mining 1,091k ounces. But Zhaojin and Harmony had not issued any quarterly results yet back then. Excluding all four makes for a much-better annual comparison...
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DiscoverGold
2 months ago
NY Gold Futures »» Weekly Summary Analysis
By: Marty Armstrong | August 10, 2024
NY Gold Futures closed today at 24734 and is trading up about 19% for the year from last year's settlement of 20718. At the moment, this market has been rising for 9 months going into August suggesting that this has been a bull market trend on the monthly time level which has been confirmed by electing all of our model's long-term Bullish Reversals from the key low. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 25225 while it has not broken last month's low so far of 23274. Nevertheless, this market is still trading above last month's close of 24730.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Gold Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2022 and 2015. The Last turning point on the ECM cycle high to line up with this market was 2020 and 2011 and 1996.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The NY Gold Futures has continued to make new historical highs over the course of the rally from 2015 moving into 2024. However, this last portion of the rally has taken place over 9 years from the last important low formed during 2015. Noticeably, we have elected four Bullish Reversals to date.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Focusing on our perspective using the indicating ranges on the Daily level in the NY Gold Futures, this market remains moderately bullish currently with underlying support beginning at 24595 and overhead resistance forming above at 25225. The market is trading closer to the support level at this time.
On the weekly level, the last important high was established the week of July 29th at 25225, which was up 8 weeks from the low made back during the week of June 3rd. Afterwards, the market bounced for 8 weeks reaching a high during the week of July 29th at 24145. Since that high, we have been generally trading down for the past week, which has been a sharp move of 4.705% in a reactionary type decline. Nonetheless, the market still has not penetrated that previous low of 23042 as it has fallen back reaching only 24038 which still remains 4.322% above the former low.
When we look deeply into the underlying tone of this immediate market, we see it is cautiously starting to weaken as even the stocastics are weakening especially since last week was a highImmediately, this decline from the last high established the week of July 29th has been important Before, this recent rally exceeded the previous high of 23826 made back during the week of June 17th. Nonetheless, that high was actually lower than the previous high made the week of May 20th suggesting this market has really been running out of sustainable buying for right now. This immediate decline has thus far held the previous low formed at 23042 made the week of June 3rd. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals. Right now, the market is neutral on our weekly Momentum Models warning we have overhead resistance forming and support in the general vacinity of 23957. Additional support is to be found at 23274. From a pointed viewpoint, this market has been trading down for the past week.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2020 while the last low formed on 2023. However, this market has rallied in price with the last cyclical high formed on 2023 and thus we have a divergence warning that this market is starting to run out of strength on the upside.
Interestingly, the NY Gold Futures has been in a bullish phase for the past 20 months since the low established back in November 2022.
Critical support still underlies this market at 22480 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Nevertheless, the market is trading above last month's high showing some strength.
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