| Other than yours truly becoming a year older, July was a good month.
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| As you can see from the chart below, gold looks to have bottomed early this month and, despite a step back last week, it seems to be getting back on track.
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| Not reflected in this chart is another gain of about $10 in today’s trading for gold, as well as a big day for silver with about a 50¢ jump.
That recent setback for the metals came on another spurt of good economic news, exacerbated by options expiry for the month, which prompted a sharp $24 drop last Thursday. It looks like the market is quickly putting that in the rear-view mirror and focusing once again on the factor that started this month’s rally to begin with.
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| And that factor, as I’ve been writing over the past couple of weeks, is the market accepting that this rate-hike cycle has essentially peaked.
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| Yes, there may be another quarter-point hike by Powell & Co. But markets always look ahead, especially these days when Fed policy drives everything. And right now they’re discounting not only the end of hikes, but the inevitable turning of the cycle toward lower rates and easier money.
If you already have your physical gold and silver positions in place, the best way to leverage this move is through gold and silver mining stocks...and it is here that both a near-term and long-term opportunity lies.
In the near term, the gold mining equities have been underperforming the metal. You can see this in the following chart of gold divided by the GDX gold mining index:
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| When gold first took off at the beginning of the month, the gold stocks leveraged the move, as indicated by the dropping ratio. That line reversed higher in recent days, as the mining stocks have not yet bought into the resumption of gold’s rally.
So in the short term, the mining stocks represent a bargain.
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| And over the longer term, they represent an even greater bargain — in fact, truly a generational opportunity.
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| Consider that mining stocks are as cheap in relation to the gold price as they have ever been. The stocks are as bombed out right now as they were in 2000, when gold was bottoming at $252 an ounce.
Today, we’re within about 5% of an all-time high...yet the equities are similarly depressed as they were 23 years ago.
Once gold breaks to a new all-time high, which I frankly expect before the end of this year, the entire mining stock sector will explode higher.
And the very best of those stocks will do much better than the average.
It’s time to get positioned, and I recommend that you do so as soon as possible.
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| Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference
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| P.S. Our August issue of Gold Newsletter comes out later this week. Click here to subscribe so you don't miss out!
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