Gold miners’ stocks have endured epic volatility in this past month, literally crashing before blasting back higher in a violent V-bounce. That preceding wicked capitulation flush savagely forced the weak hands out, paving the way for gold stocks’ next major upleg. The resulting fierce rebound signals it is already underway, with plenty of speculators and investors now chasing the huge gains this sector is famous for.
Perspective is essential and exceedingly-valuable for traders. If you don’t know where we’ve been and how we got here, you can’t figure out where we’re likely going. Context is necessary to frame this past month’s extraordinary gold-stock action, and to successfully game where this sector should be heading. Extreme volatility creates extreme opportunities, neither of which come around very often. Carpe diem!
The leading and most-popular gold-stock benchmark is the GDX VanEck Vectors Gold Miners ETF. It was the first gold-stock ETF launched way back in May 2006, giving it a first-mover advantage that has grown into an insurmountable lead. GDX’s $10.2b in net assets this week were running 34.4x larger than the next-biggest 1x-long major-gold-miners ETF! GDX’s recent raging action reveals what just transpired.
The gold stocks have been in a bull market since January 2016, but understanding March 2020’s chaos begins in September 2018. This sector had just finished a deep correction driven by forced capitulation selling on cascading stop-loss triggering, heralding a new upleg. The major gold stocks dominating GDX powered it 76.2% higher over the next 11.8 months into early September 2019, when GDX peaked at $30.95.
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