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Why Gold Stocks Could Soon Deliver “Crypto-Like” Gains

By Justin Spittler, editor, Casey Daily Dispatch

Investors are piling into gold stocks.

But you wouldn’t know it by looking at the price of gold stocks. They’re still down big on the year.

The inflows, however, tell a different story.

Last week, investors plowed $529 million into the VanEck Vectors Gold Miners ETF (GDX). That’s the most money that went into GDX in one week since September 2013.

That alone should grab your attention. But it’s not the only reason why gold stocks should be on your radar.

As you’re about to see, gold stocks look poised for a massive breakout. They could even deliver “crypto-like” returns in the coming months.

I’ll show you how to set yourself up for those kinds of gains in a second. But let me first say a few words on gold…

The price of gold is up 9% since July…

That’s a big move… but it’s hard to pin this rally on a single catalyst.

And that’s because there are a number of factors working in gold’s favor.

For starters, the U.S. dollar has plummeted over the last few months. It’s lost 11% of its value against a basket of major currencies over the past year. And a weak dollar is good for the price of gold. But that’s not all.

Inflation expectations are also rising. And we appear to be in the early innings of a new commodity supercycle.

Now, one would think all this good news would lift gold stocks, too.

But that hasn’t happened…

GDX is up just 2% since July…

And it’s down 7% on the year.

This isn’t supposed to happen. After all, these companies are leveraged to the price of gold. They’re supposed to move with gold. But they haven’t.

Instead, they’ve been lagging far behind the price of gold. Just look at this chart. It compares the performance of gold and NYSE Arca Gold Bugs Index (HUI) over the last six months. HUI tracks major gold mining stocks.

Gold Stocks Vs Gold

At this point, gold stocks have a lot of catching up to do…

To understand why, let’s step back and look at the big picture. This chart compares the gold price to HUI going back to 1998.

When this line is rising, it means gold stocks are doing better than the price of gold. When it’s falling, gold stocks are doing worse.

Gold Stocks to Gold Ratio

You can see gold stocks have been underperforming gold for more than a decade.

Gold stocks are now a screaming bargain relative to gold…

They’re now cheaper than they were at the end of 2000, just before they went on a rally for the ages.

Between November 2000 and March 2008, the average gold stock soared 1,331%. The best ones soared even higher.

And that’s exactly why I wrote this essay…

You see, most investors take a “What have you done for me lately?” approach to investing. They only buy assets that have done well recently.

Legendary investors like Doug Casey do the exact opposite. They buy what other investors hate. That allows them to pick up world-class assets for dirt cheap.

And right now, gold stocks are the most hated stocks on the planet…

According to Doug, “nobody” cares about them. That’s why we’re seeing this massive anomaly with gold stocks and the price of gold.

But anomalies don’t last forever. Sooner or later, they work themselves out.

So, consider speculating on gold stocks if you haven’t already. You can easily do this by buying GDX or another gold stock.

Just understand that GDX and funds like it take a “shotgun approach” to investing. They invest in good and bad stocks.

So, if you really want to make huge returns, you need to own the best-of-breed gold stocks.

Unfortunately, most investors can’t tell the difference between a world-class miner and a crummy one.

That’s where we can help. At Casey Research, we have teams of research analysts who scour the globe in search of the world’s best mining companies.

We even have an advisory dedicated to small mining stocks with massive upside potential called International Speculator.

Regards,

Justin Spittler
Tulum, Mexico
February 27, 2018

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