Market Rebound Should Benefit Gold and Silver Miners

Agreed bullion  has outperformed the miners throughout 2011, but that may soon change. The gold and silver miners and especially the junior explorers are especially oversold and are in a long range base from which up moves occur. The rising price of gold has significantly boosted the revenue of gold miners this year. Many miners have boosted their dividends to shareholders. Eventually these bullish fundamentals will be expressed in their share price. Gold Stock Trades senses that a lateral pass from the bullion quarterback to the miners wide receiver may be a viable option.

We are seeing the stirrings of such a game plan developing. A temporary resolution out of Europe may help the risk on rally benefitting miners of precious metals.  This may possibly predict things to come where the miners take the field over the long standing supremacy of gold bullion. In early 2009 after the Obama bailout miners outperformed gold by a substantial margin.

We have observed this underperformance of the miners for for several months and alerted readers to view this as a buying opportunity in the miners.  Over the long term the mining stock equities tend to return to the mean in the golden see-saw. There may be an equal and opposite outperformance in the miners compared to the underlying bullion. This counsel may be beginning to pay off as the underlying equities begin to catch up as investors “risk on” appetite increases as a bailout plan solidifies out of the Eurozone.

The world was waiting for solutions to Europe’s crisis such as increasing the size of the rescue funds to bailout the weaker countries. A temporary solution was reached with China’s assistance. The unexpected “risk on” rally continues for the time being.

Gold Stock Trades has repeatedly called for a readjustment of the bullion to miners reciprocal relationship. The past few weeks have revealed the potential reversal of the precious metal equities and the general market. Technical charts indicate what may well be a golden crossover of the miners as well as the general equity markets as they penetrate the 200 day moving average to the upside.

While death crosses were plaguing many sectors, the major miners as well as the general equities (SPY) are making intermediate term reversals as they cross above the 200 day moving average.  If the miners and equities are able to hold the 200 day we could see the death cross (50 day crossing below 200 day) transmuted into a golden cross (50 day crossing above 200 day) a very bullish sign for the general equity market.

At the same time, the hundred year old Dow Theory which flashed a red light confirmation that the generalmarkets were heading down in August is being reversed to the upside.  According to this theory a sell signal was given as the Dow Industrials and Dow Transports broke decisively through the June lows. The powerful  bounce in the general markets breaking through these critical levels indicates a new bull reversal may be forming.

Some of the junior precious metal miners have been affected short term as these promising selections were thrown out with the bath water in order to meet margin calls.  Our miners are in mature bases from which positive breakouts occur. Recent declines should be reversed with the powerful up moves which we are witnessing.

In conclusion, within the precious metals market itself the gold and silver miners may be entering a new era of respect in a kind of second coming within the overall rubric of the bull market in gold and silver bullion.  As the markets rebound we expect the miners to be the leaders. They have earned respect with large profits and now are rewarding dividends to shareholders.

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2 Responses

  1. Joseph E Fasciani
    Overall, I feel this is a very astute analysis and filled w/good advice. \ W/smiles, and all best, Joseph, 68.
  2. Jeb
    Thanks Joe
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