In recent days, the gold stocks have taken a big step towards a significant breakout, which appears almost certain in 2020.
The gold and silver stocks had been leading the respective metals and, as we posited a few weeks ago, could be unleashed when the price correction in Gold and Silver ends.
The sharp move in Gold and Silver last week suggests that the corrective low is in place.
The metals are currently battling with resistance at $1520/oz and $18.00/oz and remain well above their corrective lows around $1450/oz and $16.00/oz. A little consolidation or pullback would not change our view that the recent lows will hold.
The upward thrust in the metals coincided with the gold stocks advancing through their corrective resistance.
Below we plot GDX, GDXJ, and the HUI. Note the highlights.
The HUI, which is only miners (no royalty companies), broke past 220 and has reached a three-year high.
GDXJ is launched past $39 and is currently testing three-year resistance.
GDX is lagging the other two indices, which is a good sign. (We want miners and juniors to outperform royalty companies). It is a mere 5% from what would be a nearly seven-year high.
One might think the miners are overbought because they’ve trended higher over the past 15 months, and that has not happened since 2010. One might also feel the future upside is limited.
However, when charting the past ten years, we can see that the miners are not overbought and carry tremendous potential moving forward.
Both GDX and GDXJ have a chance to surge higher upon breaking out from these long bases. Upon a break past $31, GDX has a measured upside target of $50. Upon a break past $50, GDXJ has a measured upside target of $83.
I want to reiterate some things I wrote one month ago when I publicly implored readers to buy.
Everything is setting up for gold and silver stocks and juniors for significant gains in 2020.
The breadth indicators are bullish, and the miners are outperforming the metals. Also, the silver stocks are outperforming the gold stocks, and the juniors are outperforming.
These are the things we want to see ahead of a significant breakout.
Regardless of whether the break happens in the next few weeks or the next few months, I am very confident in the outlook for 2020. The following 12 to 18 months have a chance to be extremely profitable in this sector.
If you have not already, get positioned, buy and weakness and hold.
We continue to focus on identifying and accumulating the juniors with significant upside potential in 2020. To learn the stocks we own and intend to buy that have 3x to 5x potential, consider learning more about our premium service.