Yesterday the VanEck Vectors Gold Miners GDX gold stock ETF went up another 4.28% on over 83 million shares of volume to make the mark of being the single most actively exchange traded fund in terms of volume on the US exchanges on Thursday.
In comparison the SPY ETF for the S&P 500 did 43 million shares. Big money is now coming into precious metals and gold. We saw big money Wednesday, but Thursday was even bigger than it was.
Of course gold attracted attention in June when it broke through its $1350 resistance point that had been holding it down for years, but many people were not sure if the move was real or not.
They wanted confirmation before buying.
And now they are getting it as gold went sideways for several weeks before breaking out of that consolidation pattern yesterday. The mining stocks had anticipated that move by rallying up across the board on Wednesday.
So now the confirmation on the charts is there and technical traders are jumping in. And the higher the price goes up the more people will buy. There is nothing in the market that attracts buyer more than higher prices and nothing that gets computer robots to buy dips than an ETF trading above its 200-day moving average.
That’s why GDX did so much volume yesterday as it also broke out in a big way.
Notice how the 20-day Bollinger Bands on GDX came together to form a bit of a squeeze pattern. That happens when volatility shrinks and often serves as prelude to a breakout. GDX completed this pattern by closing above the upper 20-day Bollinger Band on Thursday. I thought it could take the move a few more weeks to happen, but the trend is so strong now that it is surprising everyone.
I expect GDX to go higher, but take a look at these three mining stocks too.
Agnico Eagle Mines(NYSE: AEM) also consolidated for a nice breakout yesterday too. One could buy it and put a stop on it right under $50.00.
Goldfields (NYSE: GFI) also broke out of a consolidation pattern. Both GFI and AEM are inside the GDX ETF so will benefit if more money flows into it. And of course sector leader Kirkland Lake (NYSE: KL) is now just breaking away from everything.
I had KL as my top stock pick for July and it is now just running away from everyone. The good news is that there are also several small cap stocks in an even better position now than these three stocks as they have not broken out yet – or are doing so from a stage one base.
Note: I own positions in GDX, AEM, KL, and GFI.