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From SentimentTrader= Gold bugs finally follow through

Posted by Richard640 @ 8:26 on May 25, 2024  

Gold bugs finally follow through
Key points:

  • More than 40% of gold mining stocks have reached 52-week highs
  • Few of the stocks are now in corrections or bear markets, a stark change from a few months ago
  • Similar cycles in this sector over the past 30 years had a good record of further gains over the next few months

Miners see more and more blue skies

A little over a month ago, we examined the surge in gold mining stocks. About a third of them had reached 52-week highs, a concerted push with an inauspicious record in this sector. If buyers continued to show interest, it would tell us quite a bit about their longer-term prospects.

And interest they have shown. Miners dipped for a couple of weeks after that, but buyers saw that as an opportunity, which is rare for this particular sector. As a result, more than 40% of mining stocks hit a 52-week high last week. This was the first reading over 40% in over a year, and the last couple of instances marked the nascent stages of impressive rallies.
What the research tells us…

Gold mining companies have a long and inglorious history of treating shareholder interests as secondary or tertiary interests. A few years ago, they made a lot of noise about changing their behavior and becoming better stewards of the capital entrusted to them. Investors have logically been highly skeptical of these statements, though they have mostly followed their promises.

Investors seem to be coming around to better corporate behavior, and record highs in some metals don’t hurt. Mining stocks have performed exceedingly well in response. It’s always hard to trust them, given their long history of rug-pulls once investors start to believe the bull case again. But when they cycle as they have over the past couple of months, their record over the past 30 years has been quite good and skews the case further toward the bulls.

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Post by the Golden Rule. Oasis not responsible for content/accuracy of posts. DYODD.