This has been the year that the price of gold and silver have come alive. Both have been outperforming the S&P 500. Silver is up 53% year to date as of yesterday’s close while the S&P 500 is up only 7.6% despite seeming to go up every single day. And so far this year the GDX gold stock ETF is up over 42%.
As a general rule of the thumb if you want to beat the market then you want to buy the things that are beating the market. The time to do that is when they have dips or pullbacks down to their moving averages. Well gold, silver, and the mining stocks began just such a corrective phase after gold tapped on $2000 an ounce late in July and they are now trading right above their 50-day moving averages.
No one can predict how long consolidation periods can last in an individual sector. They can go on for a few weeks or a few months, but as they reach an end the best stocks start to rocket up. The price bottom though for gold and silver appear to have already been made and now the GDX mining stock ETF is firming up and positioning itself to breakout again. Take a look at the chart.
The GDX has been consolidating right on its 50-day moving average and firming up. I think now is the time for people looking for an entry point in mining stocks to think about buying. Leading stocks in the sector will surge once the GDX closes above the resistance trendline. This is why my top stock for this month has been a small cap gold producer that is now tapping on a new 52-week high. As far as the US stock market goes I mentioned DHR on Monday. It has not broken out yet, but still can. However, it has a pattern best for a quick trade. It is gold, silver, and mining stocks were you can find the best buys to hold as they are outperforming the stock market.
I talked about this among other topics with Jim Goddard of howestreet.com in an interview I did for him yesterday.
It’s fun to talk with Jim and fun to be able to talk about what is happening in the precious metals world with you too!
To learn more about my trading and investing philosophies grab my book Strategic Stock Trading.
-Mike
