Thursday, July 16, 2015

Gold Mining Stocks Back To 2002 Prices (XAU; GDX; GDXJ)

Long time readers know our target on the metal is the 1980 Hong Kong high, $875.
The most active August futures are trading hands at $1144.60 so we have a ways to go.
Wake me up when we get there.

As to the miners specifically, we're seeing a few positive signs, some bankruptcies, a few morphing into marijuana companies etc. but there's more downside to come.
Although maybe not tomorrow. It seems that every time we see this much attention focused on the woes of the miners they bounce.

So again, wake me at $875, we'll cover some shorts and look at silver.

From Dana Lyons' Tumblr:

Gold Stocks At Lowest Levels Since Goldmember


On Friday July 26, 2002, the film Austin Powers In Goldmember was released in theaters. While I can’t recall whether it won any Academy Awards, it did do pretty well at the box office, hauling in almost $300 million. The following Monday, July 29, the PHLX Gold/Silver Index, best known by its ticker, XAU, hit a low of 55.90. That was the last time the index traded below 58…before today.

While the anti-gold crowd has certainly had the upper hand the last few years, I’m not sure even the most ardent of haters would have predicted that gold stocks would have been taken to the woodshed this badly. Of particular note, the XAU is now even below its lows of 2009.

Considering the price of gold is still well above its levels of 13 years ago, not to mention its 2008 lows, it would seem that the gold stock beatdown has gotten ahead of itself. However, that is a subjective statement....MORE
And from Barry Ritholtz at Bloomberg:

Are Shares of Gold Miners a 'Buy'?

"A gold mine is a hole in the ground with a liar standing on top of it."
-- unverified quote attributed to Mark Twain

A few weeks ago, we discussed how gold can't seem to catch a break. Despite a parade of potential market-roiling news, the reaction of the shiny yellow metal has been one of benign indifference.

After Federal Reserve Chair Janet Yellen's testimony about the likelihood of an interest rate increase sometime this year, gold fell for a fourth consecutive day. Gold now trades at about $1,142 an ounce. Aside from a three-day stretch in November 2014, gold hasn't been below $1,150 since 2009.
This isn't going to be a goldenfreude column, gloating over other people's losses. I have addressed issues in the gold-bug complex repeatedly (see this, this, this, this, this, this, and of course this). Instead, I want to consider the gold miners to determine if, after the fall in the price of gold, there is any value to be found there.

What got me thinking about this was a fascinating chart below, courtesy of Isaac Arnsdorf yesterday at Bloomberg News.

Despite the strong dollar and subsiding geopolitical tensions, gold as of yesterday was only down 3 percent so far this year. That compares with a drop of almost 17 percent during the same period for shares of miners, as measured by the Philadelphia Stock Exchange Gold and Silver Index....MORE