Will Miners Underperform Precious Metals In The Weeks To Come? (GLD, GDX, GDXJ, GG, ABX, KGC, IAG)
Przemyslaw Radomski: Fish are jumping and the cotton is high. Yes, it’s summertime and the living is (quantitatively) easy. At least that’s how it looks from the Federal Open Market Committee minutes for the July/August meeting that revealed support among some of the members for a new round of quantitative easing.With the release of the minutes Wednesday, gold went up and the U.S. dollar took a dive. The Fed members see three pitfalls for the economy– the sovereign debt crisis in Europe, a global economic slowdown led by China and other BRICs, and the fiscal cliff, which could result in substantial fiscal contraction. (Fed Chairman Ben Bernanke has repeatedly asked Congress to solve the problem, but with a Presidential election coming in November it is difficult to see how Republicans and Democrats will reach an agreement.)
Gold investors combed through the text of the FOMC’s latest minutes to find a nugget that will make the value of their nuggets go up. What they found was a single sentence towards the end of the meetings that went like this:
Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.
This sets the stage for further monetary easing possibly at the Fed’s Jackson Hole, Wyoming meeting slated for the end of this month.
Waiting for other hints from the FED, let’s now turn to the technical part of today’s essay with the analysis of the mining stocks (charts courtesy by http://stockcharts.com.).
Let’s now move on to a very interesting chart that gauges the performance of mining stocks relative to gold. It can shed light on which group of assets (miners or the underlying metals) will perform better in the next couple of weeks.
Summing up, the situation is less favorable for the precious metals mining stocks than it is for the underlying metals.
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Related: SPDR Gold Trust (NYSEARCA:GLD), Market Vectors Gold Miners ETF (NYSEARCA:GDX), Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ), Goldcorp Inc. (NYSE:GG), Barrick Gold Corporation (NYSE:ABX), Kinross Gold (NYSE:KGC), IAM Gold (NYSE:IAG).