Today James Turk told King World News that investors will finally have the wind at their backs and they should expect a banner year for gold, silver and the mining stocks.
Expect Great 2024 For Gold, Silver And Mining Stocks
January 30 (King World News) – James Turk: I’m anticipating a good year ahead for the shares of precious metal mining companies, Eric. Investors in this sector have been waiting patiently for higher prices, and it looks like they are about to be rewarded.
The mining shares are below their high prices from a couple of years ago even though gold is at or near record highs in all the world’s major currencies. This divergence has badly hit sentiment is this sector of the stock market.
When a sector gets hit like this, the most important question to ask yourself is whether shares in that sector are being accumulated? If they are, then you have a reasonable certainty that the shares of companies in that sector are undervalued.
As we know the key to successful investing is accumulating the undervalued shares and selling those that are overvalued. Physical gold is being accumulated, resulting in its recent record highs, so it is logical to expect the shares of companies that mine gold to be rising too.
Of course other factors need to be considered. Gold is money, and shares are an investment. Shares entail different kinds of risks than gold that need to be evaluated, just as you would for an investment in any share regardless of its stock market sector.
One of the most reliable chart patterns that points out overvaluation or undervaluation is a Head-and-Shoulders pattern. When they form at market tops, they illustrate distribution and accumulation when they form at market bottoms.
This chart of the HUI Index indicates that the shares of precious metal mining companies are being accumulated.
HUI Gold Mining Index Coiling To Explode Higher
Multiple Head & Shoulders Patterns Predicts Massive Bull Market Move
The last time we discussed this chart, a small H&S pattern was developing. I’ve colored that pattern in blue to distinguish it from the larger H&S pattern in green that is now being formed.
The first H&S pattern has become the Head of this new and bigger H&S pattern being formed. It’s unusual for two H&S patterns to form this way, but I’ve seen it before. Unsurprisingly, this same double H&S pattern of accumulation is also occurring with the XAU Gold/Silver Index of mining shares.
Now we need to see if the Right Shoulder of the large pattern will be completed, while continuing to accumulate good value by buying shares in this sector.
We can’t predict the future, but we can project future probabilities. Given the past record of reasonable reliability of these H&S patterns and the undervaluation of precious metal mining shares, I think there is a good probability that the HUI Index will hit 250 when the red short-term downtrend line is hurdled, which it looks ready to do.
Both gold and the mining share indices made major lows in December 2015. For the last couple of years, gold has been climbing higher without the shares. So not only is this sector undervalued, it has a lot of catching up to do, which will likely happen quickly once the HUI Index hurdles 250.
The comparable level on the XAU Index is 130. Expect them both to hurdle their resistance levels at the same time, which I think is not too far away.
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