Fade the pullback in gold because a major gold buy signal just took place with gold averaging 18% gains but the mining stocks surging 100% of the time with gains averaging a staggering 49% after this indicator flashes!
Gold miners have (already) corrected from a major surge
April 26 (King World News) – Jason Goepfert at SentimenTrader: Key points:
- Earlier this year, fewer than 10% of gold mining stocks were trading above their 200-day moving averages
- That surged to more than 90% by last week
- Similar cycles from one extreme to the other tended to precede long-term gains in miners
Gold miners are relaxing from an impressive thrust
Gold has had a tough time over the past week and is already trading down to a two-month low…
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There isn’t a perfect correlation between gold and the companies that mine it, but miners tend to move along with the price of gold. Due to what had been an excellent multi-month run, the percentage of gold miners trading above their 200-day moving average surged above 90% last week before pulling back in recent sessions. During structural bear markets, it’s rare to see thrusts like this, but this is the 3rd one in the past several years.
The stocks have already corrected
Since that signal, gold mining stocks have already tumbled. From its high on April 18, Newmont Mining has already dropped nearly 20%.
The percentage of miners above their 50-day moving average has plunged from 100% to below 15%.
And the percentage trading above their 10-day moving average cycled all the way from 100% to 0%.
Extreme cycles in long-term trends have led to outstanding long-term returns for mining stocks. The table below shows returns in the HUI Gold Bugs Index over the past 40 years when the percentage of gold mining stocks above their 200-day averages cycled from below 10% to above 90%. Over the next 3-12 months, these stocks showed excellent returns.
Zero Losses One Year Later For HUI Gold
Mining Index Highlighted On Right Below
There was quite a bit of volatility, but that’s to be expected with a volatile sector. The Risk/Reward Table shows that even with some of the successful signals, investors had to endure double-digit drawdowns at some point. But the minimum upside over the next year was +21.2%.
Average Gain For HUI Gold Mining Index
One Year Later Is A Staggering 49.1%!
For gold itself, these were also positive signals….
Average Gain For Gold One Year Later Is 18%!
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***To listen to legend Rob Arnott discuss raging inflation and what to expect in major markets around the world CLICK HERE OR ON THE IMAGE BELOW.
***To listen to Alasdair Macleod discuss collapse in the West and the fact that Asia wants to escape the collapse by backing their currencies with commodities, including gold as well as what this will mean for the price of gold CLICK HERE OR ON THE IMAGE BELOW.
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