Gold Stocks Continue to Frustrate and Confuse Investors
By: David Erfle
Since early 2017, precious metal miners have not risen along with U.S. equites, crypto’s, and pot stocks. Yet when these high flyers were aggressively sold recently, gold stocks have been sold in unison with all three. As I type this missive, the gold price is trading just $45 from a major break-out of a nearly five-year base. Yet for the second time this month the GDX is again selling down towards critical support at $21, which has been tested five times since early 2017 and was visited in mid-December when gold was nearly $100 lower.
One of the primary attributes that makes gold stocks so attractive to investors is the fact that costs do not change much regardless of prevailing gold prices. According to mining analyst Adam Hamilton, quarterly major gold miner average all-in sustain costs (AISC) within this gold upswing since late 2015 have been averaging $866 per ounce. At present, there is a giant disconnect between the price of gold and the stock prices of the miners, especially when considering the margins of the miners doing so well because they have had to keep their costs low.