Gold And Silver Popped – Now What About Your PM Stocks?
Excelsior Prosperity w/ Shad Marquitz – 03-22-2024
Initially, I wanted to put out this update on the precious metals sector yesterday; because gold and silver, caught another big bid and they had a nice breakout in pricing on the evening of March 20th that stretched into the morning of March 21st. However, considering the volatility normally seen in the days right after the Fed meetings and press conferences, I decided to wait and see how the week wrapped up here on Friday March 22nd. This gives us some weekly closes here on the charts to review together, and shows the cascading reversal back down in gold and silver prices, after the pop higher less than 2 days ago.
First, let’s back up the clock by 2 days to the evening of Wednesday March 20th through the early morning of Thursday March 21st. After the FOMC meeting and Jerome Powell’s press conference, the key takeaway message was that the Fed is staying firm with expectations for 3 more rate cuts by the end of this year. The dollar sold off towards the end of the day, and almost every market (including the precious metals) liked that news, and rallied up higher accordingly. However, the real fireworks, in both gold and silver, started in after-hours trading.
15-Minute Gold Chart – March 20th-March 21st :
The breakout in gold shot up to $2225, thus seeing the yellow metal making new all-time highs once again. Just that alone is significant, but since this happened outside of the normal trading session, many will say it isn’t as significant or doesn’t really count. This is oddly similar to that wild pricing move higher we saw on Dec 3rd-4th of last year, when gold shot up to $2152 in overseas trading. Regardless, this was an exciting move for North American investors watching gold’s futures prices climb up above the $2220s, breaking all prior nominal records, and then eventually moderating to hover in the $2210’s for about a dozen hours.
Silver had rocketed higher as well to $25.98 (right under that key $26 resistance zone), and then consolidated in the $25.60s-$25.70s in overseas trading.
I had stayed up so late watching these moves in the metals, that it had become very early in the morning, so I decided to get some shuteye; (still hoping to wake up to gold hanging onto the pricing in the $2,210s-$2,220s, and Silver hanging onto something above $25.60+).
March madness and spring fever had definitely arrived in the precious metals sector!
Then when we got to the main trading session on the morning of Thursday March 21st, the precious metals got monkey-hammered back down in a big way, (which is par for the course in this sector).
It shouldn’t be a surprise, as we are used to having our dreams dashed right when things are looking optimistic, and normally these selloff’s happen in the early morning pre-market hours or right at the start of the trading session.
Look at that ugly red candle drop in silver on the 15-minute chart the morning of March 21st, dropping from $25.77 down to $24.82 in a matter of minutes!
Silver had crashed down hard from the $25.77 to $24.82 and then managed to limp up to close Thursday at $25.01. Today on Friday’s trading session, silver closed the week at $24.84. It’s like the move up to test $26 was over before it started… leaving us with a week of lower and lower daily closes. Silver is still above it’s 50-day Exponential Moving Average (EMA), currently at $23.85, and it’s 200-day EMA, currently at $23.46, This is still a bullish posture overall, but this weeks daily pricing closes were bearish.
Gold opened the normal North American trading session for Thursday March 21st down around $2,170, and then clawed it’s way back higher to close the day at $2184.70, (but couldn’t get back up above $2,200 level again). Then on Friday, we saw pricing drop all the way down to close the week at $2,160, making a round trip in pricing.
It’s like the huge pop higher in gold hadn’t even happened…
So let’s pan back out a bit for context and look at this 3-year daily chart of gold below:
Gold is still in an overall bullish posture, still well above it’s 50-day EMA (currently at $2093.94), and still well above it’s 200-day EMA (currently at $2010.06). So overall, doing well and making a new all-time high last week, even if it was short-lived, is good for the bigger picture development.
However, there are two concerns on this chart. One is how far away from the 50-day EMA the gold price is now, after such a parabolic move higher this month. The other area that bodes caution is that almost every time we’ve seen one of these high price spikes with long wicks over the last couple years, it has marked a momentary short-term topping process. Typically the pricing pulls back to consolidate, before building the energy to make the next leg higher. (noted by the blue ellipses on the chart below).
Overall gold futures pricing has definitely had a really nice move higher in the month of March. It appears to still have a good chance to close above the psychological $2,100 level on the monthly and quarterly chart a week from now; (but it’s only $60 above that as we close this week). We just saw that a lot can happen in just one week, so it will be critical to see how things close next Friday in the yellow metal.
Now, with all these moves higher in both gold and silver this week, there were many comments on various chat forums and resource investing sites from investors puzzled or upset that their gold stocks had not reacted in a big way to the moves in the underlying metals. So with that in mind, let’s take a look at the technical set up in gold and silver stocks.
5-year GDX weekly chart:
GDX closed this week at $29.60, above both it’s 50-week EMA in blue (currently at $29.00) and 200-week EMA in red (currently at $29.08). That is at least a bullish signal, but we’ll want to see some follow through in the larger gold mining stocks and royalty companies held inside this ETF next week as well. The next key overhead resistance is in that [$32.35-$33.36] range from the prior recent peaks (highlighted by blue ellipses) on the chart above.
5-year GDXJ weekly chart:
GDXJ is mostly still larger to mid-tier gold mining companies (even though it is touted as the junior gold stocks), and it closed this week today at $36.15, mildly above the 50-week EMA blue line (currently at $35.40), and below the 200-week EMA red line (currently at $37.52). It would be good to see it definitively clear that 200-week EMA level in the near-term. The next overhead resistance is in that [$39.41-$40.95] range of the prior peaks & troughs (as noted by the blue ellipses on the chart).
Now let’s look at the Silver stocks via the EFTs (SIL) and (SILJ):
(SIL) Global X Silver Miners ETF closed this week at $25.98, just barely below the 50-week EMA (currently at $26.28), and well below the 200-week EMA red line (currently at $29.81) = still bearish. Those moving averages are the next key overhead resistance levels to clear for the silver mining bulls. After that we have that overhead congestion zone between [$32-$33] to breach if we want to see some momentum get going, but one step at a time…
(SILJ) Amplify Junior Silver Miners ETF closed this week at $9.46, just a little above the 50-week EMA blue line (currently at $9.41), but still well below the 200-week EMA red line (currently at $10.70), so that is the next key overhead resistance to clear. After that there is a big congestion zone of lateral pricing resistance between [$11.35-$12.56] from all those prior peaks and troughs (noted by the blue ellipses, and contained within the blue rectangle on the chart below).
Now what about your Precious Metals Mining Stocks?
That is a fair question, when it seems like repeated breakouts to new all-time highs in gold are not really creating a wave of new buying into the gold equities, and silver stocks continue to struggle even when we see nice pops higher in silver. This condition will eventually equilibrate, so consider the overall precious metals backdrop.
We absolutely are going to see some solid moves higher in the precious metals equities this year, based simply on the mining stocks catching up to the moves higher in the underlying metals. There have already been some nice moves up in the larger higher-quality mid-tier producers and larger developers. Eventually this buying will trickle down the risk curve, where there will be solid runs in some of the gold and silver juniors, that so many think are down for the count at present.
As this next bull market leg in precious metals continues to unfold, resource investors, and the general public at large, are going to remember that these gold and silver stocks can also go up in valuations too (not just perpetually down). Sometimes the initial moves up can be startling, and breathe some fresh life back into portfolios. {see the Montage Gold chart as a example further down}
To be clear, there are a huge number of really early-stage drill plays, still very much focused on making a discovery, that really need a combination of cash in the treasury and good drilling news to move. I’m not suggesting that they’ll just move up higher if they’ve not even found any substantial gold or silver yet. However, for any companies that have already found indicated and inferred ounces of gold or silver in the ground, then they should start seeing nice optionality to rising metals prices.
It’s a big universe of over a thousand gold and silver stocks out there, so it’s impossible for anyone to adequately cover the whole sector or paint all of the PM stocks with a broad brush. There are still so many micro-situations for each specific company. However, what I can do is just showcase a few companies held in my portfolio as examples of PM stocks on my radar really starting to move lately. These examples are indicative of the types of moves we are going to start seeing across the sector, and are likely just early signals of value kernels starting to pop. We’ll see more.
One high-quality gold stock I’ve held off and on over the last handful of years (however having sold out of it last year) is Alamos Gold (AGI). It just seemed worth highlighting it’s share price performance here because I consider it the king of the gold mid-tier producers. It also highlights that not every gold stock is down in the gutter, and investors need to be more selective for the better companies. Alamos Gold has remained more richly valued than most of it’s peers because it is an exceptionally well run company, with quality assets. That has been a bullish chart since gold bottomed in Q4 of 2022, and it really has been in a bullish trend for the last 5 years (interrupted briefly by the pandemic crash in early 2020).
Now some may be thinking, “Well, that’s fine and good for Alamos Gold, but I’ve not seen many other gold or silver stocks doing well recently.” OK, let’s have a look at another gold mid-tier producer then, that we’ve talked about a number of times on this channel, Calibre Mining (CXB.TO) (CXBMF). Calibre got punished back in Q4 of 2022 when there was confusion in the media coverage of the US sanctions on Nicaragua, and exactly what that meant for a Canadian company operating there, paired with gold prices hitting those $1,620 areas a few times.
Look at the chart below where CXB.TO traded down to $0.52 on all the F.U.D. (Fear Uncertainty and Doubt), but then spent the last year and half rallying higher; just recently putting in a new intermediate-term high at $1.89. That is a 379% move from low to high, in what many have called the worst 2 years in gold stocks they can ever remember. This move higher is because Calibre was way too oversold on the October 2022 F.U.D., but also they’ve done a fantastic of job of executing on grade-driven production growth, development, and exploration. Sure it gapped down to close this last week at $1.63, because they announced a big financing, but it’s still above it’s 50-day EMA, 144-day EMA, and 200-day EMA, and has been in an overall bullish posture for nearly for the last 18 months.
Maybe you’re still not convinced that some of the quality gold and silver stocks in the sector have begun to turn higher lately and anticipate the bull run we are going to see in this sector over the next 2+ years. Well, let’s look at another gold mid-tier producer in West Africa, and just like Alamos and Calibre it has been in a bullish posture and making traction to the upside – Galiano Gold (GAU).
I decided to ring the register on this GAU trade that I’d been accumulating in tranches buying most of the position at $0.39. $0.38, and $0.47. So when it jumped up in early January, I exited it at $1.04 for a multi-bagger gain. Here is a good example of where one doesn’t need to nail the bottom or the top to make money in this sector, but just catch the meat of the move. The stock actually bottomed at $0.36 and then recently shot up to $1.23 (total spread of 342% gains from low to high), closing today at $1.17. Yes, I left money on the table by exiting before this recent rally, but I did free up funds to redeploy to other beaten down gold and silver stocks, that have also bounced recently.
How about another example of recent gains in PM equities, but this time we’ll go with a mid-tier silver producer – Gatos Silver (GATO). Back in 2022 when it surfaced that they’d over-estimated their resources, the stock plummeted from around $10 down to the mid $2’s. I decided that this was way overdone and started accumulating in traches throughout 2022 at $2.76, $2.84, $2.92. $2.49, $2.23, $2.54, and $3.16. I’ve taken some profits along the way, but still have a solid core position up multi-fold, and the stock just closed today at $8.05 (after recently hitting a recent high of $8.82). This silver producer has been in a bullish uptrend for over 2 years as more and more investors realize that waterfall decline in early 2022 was way overdone (as often happens in resource stocks). I expect the trend to continue.
I’m not suggesting that these are the only gold and silver producers that have done well, as there are others we could bring up that have also excelled. These are just some of the stocks held in my portfolio, that I track carefully as a result. I have been happy to see these making solid upside progress in a market where if one believed all the doom and gloom on message boards one would think nobody was making any money on any of the stocks. Sure, we’ve all had our share of stinkers or even watched quality companies keep sinking, but there has been strength in many mid-tiers.
One has just needed to be selective and pick up the quality companies when the selloffs got to ridiculous levels and valuations. I’d also point out that other than Alamos, the other producers mentioned have been in Nicaragua, West Africa, and Mexico, so those investors limiting their picks to only the US and Canada jurisdictions are doing themselves a huge disservice and missing out on many opportunities abroad.
To that point, I’ll share one more gold developer, Montage Gold (MAU.V) (MAUTF) that has really moved up nicely lately. This stock is also in West Africa, and has 4+ million ounces of gold defined in the ground. On this recent move higher in the gold price, those ounces in the ground had excellent optionality and just received a nice rerating higher. I think we’ll see moves like this soon in many of the gold and silver developers and advanced explorers with defined ounces in the ground trading for comical levels at present. MAU was valued at $.051 just in October of last year, during the trough of the pullback in most gold stocks, but just rallied to $1.18 recently, closing today at $1.17. Montage has more than a doubled over the last 6 months, and is still really cheap for it’s ounces in the ground.
I bring this chart up to show just how quickly these reratings can happen, and why it is crucial to get in position in these stocks during downturns before liftoff. This stock is pretty stretched in the short-term and may need to find some gravity. However, longer-term it could still run much higher over the next 2 years, especially with the backdrop of a rising gold price.
We’ll wrap it up there for today, but the key takeaway is that this last week showed that in the medium to longer-term higher PM levels are quite possible. Gold and silver demonstrated that when they want to move, they can really get peppy in a short period of time. As for the mining stocks, they are not all dogs by any stretch, and when we start seeing the quality stocks, (like the ones highlighted above) starting to run first, it is only a matter of time before the speculative buying comes down the risk curve to start buying the rest of the juniors. Have patience that the bull market will cure many woes and biggie-size many portfolios.
Thanks for reading and may you have prosperity in your trading and in life!
- Shad