Nick Hodge,
Publisher
Dec. 18, 2023
Publisher’s Note: We had readers positioned in select gold-related positions ahead of its run to record prices this month. What follows is the gold update that was provided to members of Foundational Profits in the December issue. Enjoy.
—Nick
Gold is eying an end to the rate hiking cycle.
It has now rallied to all-time highs in US dollars just above $2,145 per ounce.
I’ve said for most of the year it was time to buy the dip in gold. That has been the right call and has yielded us fruit. The SPDR Gold Trust (NYSE: GLD) is up 6% in the portfolio and remains a buy on any pullbacks to $177. Triple Flag Precious Metals (NYSE: TFPM) is up 23% and is a buy on pullbacks to $13.
Now it’s time to firm up any positions as gold looks to consolidate its newfound power on the throne ahead of any breakouts to what is now blue sky territory.
Gold stocks are sniffing out the move and are now trading at 3-month highs, with the juniors (GDXJ) champing at the bit as they seemingly get loaded into the gate, having just jumped over the hurdle of recent resistance at $36.
For context, when gold hit its previous record highs in 2011, the GDXJ ETF traded near $180. Since then, they have gone their separate ways. Their reunion is going to be very profitable as at least a doubling is needed to get anywhere close to even in the relationship.
But don’t take it just from me. Take it from from Canaccord Genuity, which was out this month with a new report called “The Case for Gold & Gold Equities” that noted:
...Gold is up 12% this year yet the S&P/TSX Gold index is up only 4% and the GDX 9%. We also note that roughly 50% of our coverage universe is down 20% or more from their 52-week highs. In our view, generalist investors have been largely absent the gold space, hesitant to stay in front of a hawkish Fed and with fears of a hard landing receding (we think the jury is still out on that one). As we show in Figure 8, the last four times the gap between gold and gold equities have been this wide (dating back eight years) has resulted in an average 25% subsequent rise in the gold price and ~100% average increase in the S&P/TSX Gold Index.
You should already be allocated to GDXJ but it remains a buy on any pullbacks to $35.
One gold stock that hasn’t moved yet is...
Click here to access the remainder of the December issue of Foundational Profits.
Call it like you see it,
Nick Hodge
Publisher, Daily Profit Cycle