“An August August for Gold?”

310721_gold_scoreboard

Moreover, ’twas during August just a year ago when Gold impressively printed its All-Time High at 2089. August indeed, that August. But from the “That Was Then, This Is Now Dept.”, what about this August? Shall it be another august August for Gold? Or rather a month of directionless disorganization, similar to the bedlam from one Dr. August Balls of Nice, (aka “The Great Balls”, so dubbed by Inspecteur Jacques Clouseau)?

To be sure, Gold was at best disorganized throughout July, price settling yesterday (Friday) at 1817. Having opened July at 1771 and not reaching below 1766, price could not clear 1835, the month’s wee 3.9% trading range being Gold’s narrowest since that recorded over two years ago in May 2019.

Our take is that Gold shall record another august August. Not necessarily up to its All-Time High (2089), let alone our forecast high for this year (2401). But nonetheless, an up month in the offing. And if for no other technical reason than price’s refusing to succumb to the ongoing parabolic Short trend as denoted by the rightmost red dots in this chart of Gold’s weekly bars from one year ago-to-date:

310721_gold_weekly

“So mmb, are you already eliminating August for Gold reaching your 2401 level?”

Not absolutely ruling it out, Squire; rather, being seasonally realistic. Our sense is that Gold’s best shot to accelerate upward shall occur during the September-October period when — for everything else — “it all goes wrong”. Such timely market turmoil you and I see as justified both fundamentally and quantitatively, but to which the balance of the investing world seem out to lunch, (which is always how it is before IT suddenly happens).

Still to this day when we query money folk about how they’re prepared to protect their or their client’s portfolios upon waking up with the S&P 500 futures “locked limit-down”, it remains that the subject swiftly is changed and/or we hear crickets. And as we’ve already cited: upon the price/earnings ratio of the S&P reverting to its mean (19.2x) — which it has always done throughout the Index’s 64-year history — the loss this time ’round regressed into “Dow” terms may exceed -20,000 points in as little as three “trading-suspended” days. (As a recent reminder exercise, calculate the “Dow” high from 19 February to its 18 March low of just a year ago).

And now Dr. Anthony Fauci declares our COVID vaccinations shan’t necessarily shield us from DELTA? What’s next? OMEGA? Got Gold?

Surely none of us wish to see Gold soar because the world ends, (“Dow +2”). We merely wish to see Gold rise to meet its Scoreboard debasement value, presently shown as 3888.

Still to date in 2021, hardly is Gold on any run. For as we turn to our BEGOS Markets Standings, the yellow metal is but one notch above the bumbling Bond:

310721_begos_standings

‘Course, we cannot completely discredit the Bond: for as the “red-hot” economy was instead cooling through most of Q2, the price of the Bond today is 7.6% above its 18 March low, the yield since then having fallen from 2.505% to now 1.897%. Clearly that is indicative of Bond traders (who live in reality) following the Economic Barometer, whilst equity traders (who live in lemming land) chase earningless risk. Here’s the Baro, its rightmost pale violet stint essentially representative of the metrics reported for Q2.

Thus when you just saw the “Advanced Gross Domestic Product” annualized pace for Q2 come in nearly flat (6.5%) compared with that of Q1 (6.3%) — whilst all around were projecting a pace some 30% higher (8.5%) — hardly were you surprised when CNBS reported: “U.S. GDP Rose 6.5% Last Quarter, Well below Expectations”. (But that’s why you follow our stuff).

Still, with July’s Chicago Purchasing Managers Index and the Conference Board’s read on Consumer Confidence both improving, June’s Personal Income was flat with Spending hardly higher, New Home Sales slowing, and Pending Home Sales shrinking. “Red-hot”? Not: as so anticipated the Federal Open Market Committee, their only “talking taper” as usual in again voting unanimously last Wednesday to do nothing. They know they’re both stuck as well as a catalyst for “it all going wrong” the instant they jerk the rug a tad.

Meanwhile, we have a positive read on Q2 Earnings Season: with 277 of the S&P 500‘s constituents having reported, 88% having beaten their bottom lines of a year ago, far and away the best year-over-year performance we’ve ever recorded. (‘Course going from “shut” to “open” makes for such substantive improvement). In fact, so “august” are earnings improvements that (thus far) they’ve knocked our “live” p/e for the S&P down from 56.3x a week ago to 49.8x today. Why, a return to the 19.2x median warrants an S&P correction of now just -61%. Are you prepared? (…crick-crick …crick-crick.. .crick-crick…)

As to the yellow metal’s aforementioned state of disorganization, so ’tis further emphasized here per our graphic of Gold & Co’s percentage tracks from one year ago-to-date, all of which are under water save for (barely) Franco-Nevada (FNV) +2%, followed by Newmont (NEM) -4%, Gold itself -7%, the Global X Silver Miners exchange-traded fund (SIL) -11%, Agnico Eagle Mines (AEM) -14%, the VanEck Vectors Gold Miners exchange-traded fund (GDX) -16%, and from worst-to-first-and-back-to-worst Pan American Silver (PAAS) -21%. But upon their all going well when “it all goes wrong”, don’t forget the leverage, luv:

310721_gold_gdx_nem_aem_fnv_sil_paas

Now here’s an eye-opener that is as Pro-Silver as ever. In going ’round the horn for all eight BEGOS Markets by their daily bars from one month ago-to-date, look notably at the ascending grey trendline for precious metal Gold. Look as well at the ascending grey trendline for industrial metal Copper. And yet almost impossibly, the same for Silver is descending. But here’s the good news: rare as ’tis, this phenomena has occurred (on a mutually-exclusive basis) six times since the beginning of 2020. And each time hence Silver has within a matter of weeks settled at minimum three full points higher. So from the yellow and red metals to the white metal, there’s a tradable gift on a Silver platter. Note too that Silver’s baby blue dots indicative of trend consistency have just kinked up:

310721_begos_dots

Next, specific to the last fortnight, here we’ve the Market Profiles for Gold on the left and Silver on the right, their nearby trading supports as noted, (with a little resistance up there for Gold at 1832):

310721_gold_silver_profiles

And it being month-end, we can’t quite wrap it without bringing up Gold’s Structure by the monthly bars. With respect to that mentioned earlier, the rightmost bar shows us just how comparatively narrow was Gold’s July … ahead of what we anticipate shall be a more robust, indeed august, August:

310721_gold_structure

To close, we have these three observations:

  • From the ever-popular “They’re Just Figuring This Out Now? Dept”: Bloomy reported this past week that “Oil Rebounds After Industry Report Shows Shrinking U.S. Supplies”. Given the perfunctory shutdown of otherwise potential U.S. Oil transport facilities in the changeover of the StateSide Administration this past January, ought we be surprised? (See too, in leading the aforeshown BEGOS Markets Standings, Oil +52.4% year-to-date … Thanks Joe).
  • Next week brings the oft-dubbed “Mother of All Numbers Day” (Friday, 06 August) when the Department of Labor Statistics reports Non-Farm Payrolls for July, the expectation being for a 9% gain over those for June, with the Unemployment Rate dropping from 5.9% to 5.6%. That’s nice, ‘cept the ADP Employment Change (Wednesday, 04 August) for July is estimated to be a 6% loss. But who’s counting, right?
  • And last Wednesday, Dow Jones “Red-Hot Economy” Newswires noted in spite of vaccinations, COVID continues to emanate from one surge to the next, but that “…a host of adaptations by governments and businesses have also helped limit economic damage…” Translated to layman’s terms, such “adaptations” are currency debasement and enterprise restriction. Reason enough to follow the stars for Gold’s august August that also shines for Silver!

Cheers!

…m…

www.deMeadville.com
www.TheGoldUpdate.com

Why Gold Mining Stocks Are Under Pressure Today

Gold Mining Stocks Retreat As Gold Moves Below The $1800 Level

Gold mining stocks are under strong pressure today as gold declined below the $1800 level after Fed indicated that it expected two rate hikes in 2023.

The weakness is broad, and notable gold mining stocks like Barrick Gold, Newmont Corporation, Kinross Gold or Yamana Gold are down by 4 – 6% in today’s trading session.

Most gold mining stocks have already lost a lot of ground in June as gold’s previous rally was stopped near the $1900 level and traders began to take profits in shares of gold miners.

The recent sell-off in the gold market put additional pressure on gold mining stocks which are now trading at levels that were seen back in April.

What’s Next For Gold Mining Stocks?

Near-term dynamics of gold mining stocks will depend on the dynamics of the gold market. Gold moved from $1900 to $1775 in just five trading sessions and its RSI reached the oversold territory, so the chances of a rebound are increasing.

It should be noted that gold mining stocks provide investors and traders with leverage to the price of gold. This leverage works both ways so gold mining stocks are typically declining faster than the price of gold in case gold moves lower.

Gold mining stocks have started to pull back after rally in March – May before gold began to lsoe ground at a fast pace, so some traders were prepared to the recent sell-off.

However, it remains to be seen whether traders will rush into the segment in the current market environment as higher interest rates present a serious threat to precious metals.

I’d note that Treasury yields have failed to gain additional upside momentum after yesterday’s rally, and the yield of 10-year Treasuries declined from 1.59% to 1.53%. If bond markets calm down, gold prices will stabilize, and gold mining stocks will have a good chance to rebound from current levels.

For a look at all of today’s economic events, check out our economic calendar.

Gold Mining Stocks Pull Back But Stay In Bullish Mode

Gold Mining Stocks Video 18.05.21.

Low Interest Rates And Inflation Fears Provide Strong Support To Gold Mining Stocks

Gold mining stocks pulled back a bit after yesterday’s upside move as gold failed to gain more upside momentum after a successful test of the resistance at $1865.

The pullback was broad-based, and leading gold mining stocks like Newmont Corporation, Barrick Gold, Agnico Eagle Mines, Kinross Gold were under pressure in the current trading session.

However, these stocks remain close to yearly highs and may have a good opportunity to gain additional upside momentum in case the price of gold manages to stay above the $1850 level.

It should be noted that many gold mining stocks had a challenging start of the year as gold price declined and traders were focused on other market segments in search of growth.

However, the situation is changing since gold price managed to get from the lows near $1675 in March to the recent highs at $1875. Continued strong support from the Fed and rising inflation provide a solid setup for further upside for both gold and gold mining stocks.

What’s Next For Gold Mining Stocks?

Traders have already provided strong support to shares of Newmont Corporation which is up by about 25% year-to-date. The performance of Barrick Gold, Agnico Eagle Mines and Kinross Gold is more modest, but traders may use these stocks (and other similar gold mining stocks) as a catch-up play in case gold rally continues.

Valuations of gold mining stocks look low compared to many market segments. Even after the recent rally, Newmont Corporation is trading at less than 20 forward P/E. Barrick Gold’s valuation is about the same, while Kinross Gold is trading at just 9 forward P/E.

It should be noted that gold mining stocks typically provide traders with leverage to the price of gold. This is a double-edged sword since shares of gold mining stocks will likely drop more than the price of gold when the gold market is in a downside trend. However, gold mining stocks tend to significantly outperform gold when the market is bullish.

This phenomenon is already visible this year as gold is yet to get to the levels that were seen at the start of this year while gold mining stocks are moving higher. With some help from the price of gold, the current upside move in gold mining stocks will continue.

For a look at all of today’s economic events, check out our economic calendar.

Gold Miners Supporting a Breakout in Precious Metals

After a prolonged decline, gold miners are finally showing signs of strength. The charts below support an immediate breakout and renewed uptrend. This dovetails nicely with our Gold Forecast supporting a return to $2000 by August.

GOLD MINING ETF (GDX): I believe gold miners formed a bottom in March. If correct, prices should stairstep their way back towards the $45.00 level and potentially to new highs by August.

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NEWMONT (NEM): We are getting a robust move in Newmont above the March high and intermediate trendline. By all measures, it looks like a breakout. Prices could reach new all-time highs as soon as May.

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FRANCO-NEVADA (FNV): Franco-Nevada was the first to break above the March high. Prices are above the 200-day MA after forming the small bull flag. The trend should continue back towards the $160 level and new all-time highs.

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KIRKLAND LAKE GOLD (KL): Kirkland Lake Gold is my favorite gold producer and could have significant free cash flow in 2021. They have zero debt and $850 million in cash. Prices formed a picture perfect W-bottom in March and are breaking out as I write. This is my highest conviction holding; I am significantly overweight.

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Our Gold Cycle Indicator is at its most bullish reading (ZERO). Our Educational Portfolio has been buying miners aggressively. I believe it is well-positioned for the next advance. 

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 We recently updated our Top 10 Speculative Gold Stocks. Several companies have gold in the ground selling for just $10 per ounce. For more updates, please visit here.

Disclosure: I am long all the stocks mentioned in this article.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle.

For a look at all of today’s economic events, check out our economic calendar.

Silver Forecast – Are Robinhooders Losing the Battle in Silver

Silver is under attack, and prices are back below the $27.00 level. Yesterday’s gap higher was closed, and prices are backtesting the intermediate trendline. What happens next is crucial!

  • A close below $26.00 would establish a false breakout and bearish reversal (favorite trick of manipulators). In this scenario, silver could collapse back towards $22.00, possibly lower.
  • To reverse today’s institutional attack, retail traders need to push futures back above $29.00 before Friday.

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GAMESTOP CHART (GME)

GameStop is down over 60% and decisively below the $100 level.

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AMC ENTERTAINMENT (AMC)

Prices are down over 50% and could reach support near $5.00 as soon as today.

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On a positive note, bellwether Newmont Mining is diverging bullishly.

NEM

Newmont is rallying despite sharply lower gold and silver prices. A close above last Friday’s high ($61.50) would be bullish and support higher metal prices next week.

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Note- The buying of physical precious metals is exploding and could have a bullish lag of one to two weeks.

How metals and miners respond after Friday’s employment report key.

AG Thorson is a registered CMT and expert in technical analysis. He posts daily updates to Premium Members. For more information, please visit here.

For a look at all of today’s economic events, check out our economic calendar.

3 Gold Stocks Ready to Glitter

After a record runup in gold prices during the first half of 2020, demand for the precious metal has eased in recent months amid a shift to risk-on plays and institutional investors diversifying into other inflationary-hedge assets, such as Bitcoin.

However, with central banks pumping enormous amounts of stimulus into the financial system, many analysts think the yellow metal will regain its luster as the greenback decreases in value.

“With record global debt and MMT in place, there is more certainty that it is about time that gold will reprice itself to account for dollar debasement. When faith in the modern monetary system is shaken, there is a tendency to shift towards hard assets, probably justifying why central banks across the globe have been net buyers of gold bullions since the Global Financial Crisis,” Edelweiss chief market strategist Sahil Kapoor told investors, per Kitco.

Let’s take a closer look at three large-cap gold mining stocks that closely track the commodity’s price. We’ll also use technical analysis to identify important trading levels.

Newmont Corporation

With a market capitalization nearing $50 billion, Newmont Corporation (NEM) is the world’s largest gold producer, with an annual consolidated output of around 6.39 million ounces. The gold miner, which has extensive operations in the Americas, Australia, and Africa, offers a 2.68% dividend yield and trades 32.53% higher over the past year but has eased 5% since early November.

From a charting perspective, look for entry points near support at $58.30 while targeting moves to overhead resistance at $68.50.

Barrick Gold Corporation

Toronto-based Barrick Gold Corporation (GOLD) has major mining operations in North America, South America, Australia, and Africa, with its assets significantly boosted in 2018 after its acquisition of Randgold. Last year, the company said it was on track to reach its annual gold production target of between 4.6 and 6 million ounces. The $39.56 billion Canadian-based gold miner yields 1.61% and has gained 21.31% over the past 12 months. Year to date (YTD), the shares have edged 1.8% lower.

Chart wise, look to buy the stock at current levels if support holds at the crucial $22.50 area. Consider booking profits on a move to technical resistance at $28.45.

Kinross Gold Corporation

Yielding 1.72%, Kinross Gold Corporation (KGC) explores for and produces gold in Canada, the United States, Russia, Brazil, Chile, Ghana, and Mauritania. The mining giant, which generates annual gold equivalent production of around 2.5 million ounces, received an upgrade from Barclays last month based on the company’s valuation relative to more diversified mining firms. Though Monday’s close, the gold miner currently trades at around eight times forward earnings, placing it at a significant discount to its historical earnings multiple of 37 times. Although the company’s stock has slipped nearly 5% YTD, it has jumped 40% over the last year.

From a technical standpoint, look for entries near key support at $7 while booking profits on retests of horizontal resistance at $9.30.

For a look at today’s earnings schedule, check out our earnings calendar.

Barrick’s Gold Rush for Newmont

  • Barrick is the initiator of the transaction. Actually, this is not the first attempt by these companies to unite. If my memory serves me right, the latest attempt, an unsuccessful one, was made in 2014.
  • Barrick proposes to purchase Newmont’s shares at a discount to the market price. In particular, the merger would offer 2.5694 Barrick shares for each NEM share. Friday’s closing price is about $33.5, which implies a discount of 8% to the market price. Thus, the entire company is valued at $ 17.85 billion.
  • The birth of a giant. If the merger takes place, a real giant with a production volume of about 10 million ounces of gold and revenue of about $ 16 billion will appear in the market.

What do I think about this transaction? I am not an industry person so I will bring forth my arguments from an investor’s point of view.

First, the transaction is far from a given. I believe that Newmont is obviously undervalued. Barrick valued Newmont at an EV/EBITDA of 7, while the average of the sector is about 8.6, according to Bloomberg. According to the EV/Reserves and EV/Output multipliers (which are used to evaluate gold mining companies), the valuation of the company was done almost in accordance with market prices. Nevertheless, there is no premium for any multiplier. What are the benefits of Newmont shareholders? Moreover, it seems like this transaction is more important for Barrick than Newmont.

Secondly, if Newmont merges with Barrick, most probably, the merger with Goldcorp will not take place. As I understand, the process is already close to the final straight. Is the deal with Barrick worth sacrificing Goldcorp? I am not ready to answer this question at this point.

Thirdly, I believe that a huge hypothetical company carries high risks associated with corporate governance. It will not be easy to manage such a sockdolager.

$17.8 billion Barrick’s bid

I guess we should avoid drawing conclusions as to whether the transaction will take place or not and who will benefit more ahead of time. By the way, why not fantasize and imagine that Warren Buffett is standing behind the transaction. He could be trying to somehow get out of under after the fall of Kraft Heinz

Joking aside, shareholders of Newmont, in my opinion, must not be happy with this proposal, which makes me believe that the merger will not take place under the terms proposed. Moreover, I do not exclude that Newmont will sink a bit (many people have purchased shares against this transaction) in the event of cancellation, which will be a good opportunity to purchase shares at a discount.

The very fact of Barricks’ proposal confirms my arguments about the active process of consolidation in the sector. Judge for yourself. Gold mining is one of the most fragmented sectors in the global economy – two leaders and a whole bunch of medium and small-sized companies.

What do potential buyers seek? First of all, they check on the quality of assets, the size of reserves and resources, as well as the total cost of extracting one ounce of gold (all-in sustaining costs or AISC). In addition, a potential buyer will pay attention to the amount of debt, perspectives of operational performance, and profitability.

Will Barrick try to catch a smaller bird?

I have made a list of medium-sized companies, which, in my opinion, could be absorbed by larger ones. For example, if the purchase of Newmont fails, Barrick may well focus on some other smaller company. Moreover, we cannot rule out the factor of Newmont. Agnico, Newcrest, Anglogold, Kinross and, finally, our dear Polyus are also there.

Gold Companies

Barick Newmont Yamana Semafo IAMGOLD Endeavor Detour New GoldI have to stress once again that each of the companies above may become subject of acquisition in the foreseeable future. Each of these companies is quite promising in terms of production and revenue growth and is characterized by fairly high profitability. Besides, none of them has had a high level of debt (if the Net debt/EBITDA ratio is lower than 3, I believe there is nothing serious to worry about).

In terms of the current market valuation, I liked B2Gold, Centerra, and IAMGOLD. I think B2Gold had the most coherent valuation (taking into account one of the lowest AISC on the list; see chart). Centerra and IAMGOLD seem like the most undervalued.

I do not claim that these three companies will definitely become objects of acquisition in the near future. I am just pointing out their advantages.

The sector is in the process of intensive consolidation. Now all attention is paid to the possible transaction between Barrick and Newmont. After the transaction takes place (or fails), M&A processes may still continue in the sector. Or, the other way around. While the giants are arguing about how they should merge or whether they should unite at all, somebody may make a couple of deals on the sly…

A quite interesting period is awaiting the gold sector! I have my popcorn already.

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

Gold Producers – Buying Opportunity if the Reports Disappoint

As a matter of fact, Newmont is one of the world’s leading gold producers. After combining with Goldcorp, the volume of the company’s production will be about 7 million ounces. The Competition Bureau of Canada recently approved the deal, which is expected to be completed in the second quarter of this year.

Newmont NEM US ratios
While Newmont is getting ready to publish reports, let us discuss the market expectations. The quarterly report forecasts a slight increase in revenue and EBITDA and a decrease in net profit and EPS. If we compare changes from year on year, we can expect a more substantial decline. I believe that this is primarily due to the decline in gold production. Let us analyze how things will actually go. Guessing whether the market will hit the spot or not is quite a thankless job.

On the whole, I have a positive opinion on Newmont and Barrick Gold (GOLD US) and regard them as defensive assets. In terms of multipliers, they look about the same (Barrick is slightly more expensive). The difference is that the beta coefficient of Newmont is positive, while Barrick has a negative beta coefficient. Therefore, Barrick has had my preference for all seasons since it works better against the market.

Getting back to Newmont, I have to say that I don’t actually expect anything bad from the reports. If the results are lower than predicted (without force majeure), and the asset prices fall down, it will obviously be a good buying opportunity for a quality asset at a discount price, especially against the background of rising prices of gold. I expect that at this level some will enter the position, and those who already did, will increase it.

Anyway, let us wish good luck to everybody!

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.