A few
weeks ago I noted that gold stocks were either crazy or right, because they
were continuing to hold up despite gold and silver prices coming under
pressure. Many gold stocks have taken a lot of damage since then and
silver broke through support, but the gold and silver miners still are
holding up much better than you would expect.
I
believe this continues to speak for the gold bear market being closer to an
end than most people realize. Let's take a look at some charts of
mining stocks and see.
Frano-Nevada
I think is the cleanest example of this. I included the price labels to
note the high and low prices for Franco on the chart. Notice that ever
since the major gold bottom in the middle of 2013, Franco has traced a
pattern of higher highs and higher lows. This is in the face of
continued pessimism in gold and gold stocks and with gold testing its lows a
few different times, including recently. Franco just continues to buck
the trend in gold which I believe is the telltale sign of a gold bottom
coming.
Royal
Gold has a similar chart to Franco-Nevada. It made a low in
mid-2013 with low in gold, then a higher low at the end of 2014. Then
it has put in higher lows and higher highs in 2014 even with two failed
rallies in gold.
Goldcorp
paints a picture that I think is very important to look at. First off
Goldcorp traded in a volatile sideways range in 2011 which helped foreshadow
the top in gold in 2011. Then Goldcorp started making lower lows in
2012 as gold remained weak. But gold only went sideways in 2012, and
notice how Goldcorp continued to underperform gold in 2012 as evidenced by
the relative strength chart against gold on the bottom. This was more
evidence that the gold bear market was intact in 2012 even as gold tried to
break out of its range. Once gold failed in 2012, Goldcorp crashed
along with gold during 2013. But notice how Goldcorp made a low at the
end of 2013, and has held that low in 2014 even as gold has remained weak.
This has caused the relative strength chart against gold to start
drifting upward in 2014, which is what you want to see if gold was really
making a final bottom here.
So if
gold were really headed to new lows to conclude 2014 and into 2015, we would
not expect the gold miners to have performed so well this year against gold.
Instead they should have continued to amplify gold's losses on the
downside, and should be trading at much lower levels relative to gold than
they did in 2013. This positive divergence against gold for the gold
miners is a bullish sign that you won't hear anything of from the mainstream
media.
Silver
miners tell a similar story to gold miners. Even with silver making
another new low recently, most silver miners have outperformed silver all
year and most of them are refusing to make new lows along with silver.
Take a look at some silver miners below.
Silver
Wheaton has actually bucked the downtrend in silver since the middle of 2013.
You could even say it has held up against silver going all the way back
to 2012. Notice on the relative strength chart we see a pattern of
higher lows and higher highs since mid-2013, meaning that Silver Wheaton is
outperforming silver. This argues for the coming end to the silver bear
market.
Pan
American Silver and Silver Standard have similar charts, but the main point
is that they both have outperformed silver all year in 2014. They both
also haven't made a new low even though silver has.
There
are gold and silver stocks that have made new lows recently but most of the
miners have showed major strength against gold and silver during 2014.
This continued strength could be indicating that gold and silver are
getting very close to ending their bear markets even as sentiment remains
bearish.
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