When Gold failed to break above critical resistance in the spring, we knew it could be a negative signal for the precious metals sector.
Real interest rates were stable and rising while the US equity market continued to grind higher. The US Dollar, which had bottomed in February began to rally strongly.
While we began to prepare for the downside in precious metals by raising cash and going short, we wanted to know when sector could rise.
The precious metals sector is extremely cheap on a present and historical basis but the fundamental driving force is not in play yet.
Essentially, Gold to rise requires accelerating inflation or Federal Reserve rate cuts.
In studying Fed history, we became convinced that this historic buying opportunity will be around the time the Fed Funds Rate peaks. In other words, it will be around the time of the Federal Reserve’s final interest rate hike during the cycle that began in December 2015.
We studied the history of gold mining stocks and Federal Reserve rate cuts going back 60 years.
During that period, there have been roughly 12 rate cut cycles.
In 10 of the 12 cycles, gold stocks gained a minimum of 52% and an average of 185%.
The two times they did not gain, (Gold was crashing in 1981 and inflation was skyrocketing in the mid 1970s) are nothing like today. So we can forget about those.
In fact, the gold mining sector is currently amongst the cheapest it has ever been.
Let me show you some charts
This chart shows gold stocks relative to Gold. The ratio is currently close to the cheapest ever.
This chart shows how cheap gold stocks are relative to the stock market. We are closing in on a historic, nearly 100-year low!
Finally, take a look at the S&P TSX Gold Index and its rolling return over various time periods.
Consider how oversold the gold stocks are on a very long-term basis. The only comparable periods are 2000 and the late 1950s.
Moreover, note the index is trading around the same level it was 38 years ago! You have to go back to the early 1970s and early 1960s to find something similar. Those were spectacular buying opportunities!
Gold stocks are extremely and historically cheap. At the only other points in history when they were this cheap, they delivered spectacular returns over the next 10 years
That being said, the current trend is down and your epic buying opportunity won’t arrive until the Fed is done hiking rates.
When exactly will that be
Probably sometime in the middle of 2019.
But here is another piece of extremely valuable information.
During those rate cut cycles, the gold stocks began their advance an average of two months after the Fed Funds rate peaked with a median of one month.
Finally, we should note that during the first rate cut cycle in the 1960s, gold stocks gained 311% and during the first rate cut cycle in the 2000s, gold stocks gained 600%
This is why I have focused my career on Gold and the junior mining sector
Gold and gold stocks are poised to perform very well but your eyes should be on the junior mining sector where select companies could rise 5-fold, 10-fold, even 20-fold over the next few years.
I'm Jordan Roy-Byrne, CMT, MFTA, the editor and publisher of TheDailyGold Premium. I'm a Chartered Market Technician, a Master of Financial Technical Analysis, a member of the Market Technicians Association and have spoken multiple times at major mining investment conferences.
Unlike the vast majority of my competitors I invest my own money and inform subscribers as to what I am buying and selling. My model portfolio is a real brokerage portfolio, which provides complete transparency and accountability to subscribers.
Since I started my newsletter in 2009, my portfolio has more than quadrupled. That is during a period when GDX and GDXJ have been cut in half! This means we have outperformed the sector by over 750%.
The majority of our competitors do not publish portfolio results due to the disastrous losses they incurred from 2011-2015.
In 2017, GDX gained only 7.5% while GDXJ gained only 1.5%.
Had you joined our service at the very end of 2016, you would have had the following opportunities in 2017:
We bought a developer in northern Canada on December 28. It later surged 200%...
Days later we bought an explorer in Canada, which gained 101%...
A day later we bought another explorer in Canada, which gained over 120%...
In February we bought an early stage explorer in Mexico. It surged over 150%...
In the summer we identified a promising discovery in Australia. We bought in, and our initial buy gained almost 300%...
Recognizing another tremendous opportunity, we recommended that company’s partner, which had not been discovered yet by the market. It exploded over 480%.
You are probably wondering how we generated strong returns during a difficult period. The good news is the sector is in a new bull market and therefore much easier to make money than it was a few years ago. However, making money is not enough. You have to make it and then keep it.
I do not want to share all my secrets but let me provide information relating to our process.
First, we look for the junior companies that own the projects a larger company would want to buy. In short, these are projects with multi-million ounce potential and high margin potential. Second, we want to buy value. The better values we can find, the less downside potential and therefore more potential upside there is.
With respect to the portfolio, we want to size positions correctly. We seek to overweight the positions we are most confident in while underweighting higher risk but higher potential companies.
Finally, there are important rules with respect to taking profits and selling. We always want to cut our losses before they become bigger losses. We use a mental stop loss of 20% on our positions. Also, we should let winners run but periodically "trim" these positions when they become too big.
"I have been following Jordan’s work for the past six years and can say he is absolutely one of the best analysts in the field. I am continually impressed by the volume and quality of content Jordan puts out on a weekly basis. His reads on both the fundamental and technical picture allow readers to understand the market and his company analysis and stock selection are excellent. He is one of the best in this industry at finding stocks that can rise 500%-1000%. Understanding the nuances and particulars of this sector requires a steep learning curve. It can take years to fully acclimate yourself. Best to learn from Jordan and let him do the work for you!"
— Collin Kettell, Partner & CEO Palisade Capital
"In an industry full of snake oil salesmen and fairy tale promises, Jordan Roy-Byrne's advisory services and deep comprehension of the precious metals market is second to none. He understands that markets have cycles, in particular highly volatile gold mining shares, and helps his subscribers navigate pitfalls by selecting the right securities which can dramatically outperform while cutting losses quickly. Highly recommended service for those with desire to invest in the gold mining sector."
— Tiho Brkan, Fund Manager for High Net Worth Individuals
"I have subscribed to many investment services over my lifetime. I can honestly say Jordan Roy-Byrne has developed not only one of the most analytically accurate, but also has hit the high water mark by making his analysis feel personalized. In addition to a detailed weekly report, he often sends additional emails with daily observations of not only the physical metals and miners, but also related metrics such as the market and currencies. His service is a great integration of history and future probability that has not only helped me make money, but also avoid losing. It truly is a 5 Star Service at a great price."
— Donovan P. CPA & Attorney
There is no catch. For less than $1/day you get my high quality, actionable research and you can invest right alongside me.
There is a second chance opportunity in this sector and if you don't act soon you risk missing the next big move. Warren Buffett always says it's better to be a year early than a day late.
I believe the gold stocks could explode higher over the next 12 to 18 months and 2018 could be your last chance to invest at cheap prices.
"I am simply a pure market-timer for a broad basket of gold stocks and precious metals. Jordan, on the other hand, has provided superior STOCK-PICKING abilities over the longer-term. I am familiar with most gold stock subscription services over the past 30 years. I rarely provide endorsements of any kind, but Jordan's ability to analyze individual gold/silver stocks has been among the top 5 services over the past decade. First and foremost, I respect his integrity. "
— Dr. Jeffrey Kern, Developer of SKI Gold Stocks Trading System