Comparing Gold Producers To Mainstream Stocks

Long term trends take a long time to reverse. One such trend compares gold mining stocks to the S&P 500 stocks. From 2002 until 2011 gold mining stocks outperformed generic stocks, as can be seen in the following chart. (Charts courtesy Stockcharts.com).

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The trend unmistakably featured mining stocks (HUI) over the S&P 500 stocks. From 2011 until recently, the trend reversed, putting Wall Street back in the lead. Our next chart shows that we may be about to see a trend favoring miners again. 

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Featured is a chart that compares gold producers (GDX) to mainstream stocks (SPX). The fan blades highlight incremental breakouts that show miners are outperforming generic stocks. Breakout #4 inched above the 50-week moving average (blue line), #5 closed above the 200-week moving average (red line), for the first time since 2016. The blue arrow points to the spot where another fan blade is likely to be drawn. The moving averages themselves are rising for the first time in years! Seasoned observers consider this a very bullish setup, resulting in money leaving generic stocks and moving into the gold sector! 

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Not to be overlooked is the silver producers sector, represented here by a chart of SIL the silver producers ETF. Silver usually outperforms gold during a bull market, and SIL is breaking out from congestion, within the rising blue channel. A close above the blue arrow will confirm the breakout, which could happen this week!.

Disclaimer: Investing involves risk taking. Please do your own due diligence. Peter Degraaf is NOT responsible for your trading decisions.

Peter Degraaf is a stocks and commodities investor with ...

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Bill Myers 10 months ago Member's comment

Nice.