As much as I value the physical gold that I’m holding, there’s nothing quite like the miners for quick and substantial profits. If your timing is good, you can rinse and repeat with gold mining stocks: buy the dips, take profits on the rips, and sit on your hands until the next train comes to the station.
Not that you can just do this randomly – it takes patience and plenty of research, which is why I make recommendations from time to time on the best mining stock opportunities in the business.
If you want 10x returns in this type of speculative market, you have to be a disciplined stock picker, not a passive index buyer.
Taking a look at the gold mining sector now, we see that average stock prices had a short-term peak in September and have dipped in October. This is right out of the gold stock seasonality playbook, which is predicting a bottoming process followed by the strongest seasonal rally of the year:
Much of this cyclicality is due to miners’ Q3 reports, which are often released in November. Positive earnings surprises are the norm during this time: from 2010 to 2018, global gold mine production never declined from Q2 to Q3 – not even once.
“Past results are no guarantee of future results” – I know, you’ve heard that a million times, and while there’s truth to that disclaimer, the seasonal trend is undeniable here. In the aforementioned time frame, the average quarter-over-quarter global gold mine production growth was, believe it or not, 5.4%.
Keep in mind that costs haven’t risen dramatically in the last few quarters, but the gold price has, rising from $1,202 to $1,500.
This is a big deal because if your costs were $1,000 per ounce and your profit was $202 at $1,202 per ounce, your profits this past quarter would be up over 100% year-over-year!
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These are what you call blowout profits for a sector that is about to rip much higher, in my opinion.
Demand for physical gold is as strong as ever, and miners’ cost of production is low: in Q2, the average all-in sustaining cost for the top 34 gold miners in the VanEck Gold Miners ETF was less than $900 per ounce, indicating excellent industry-wide cost control.
Unless some massive shock to the system happens, the seasonality playbook should go according to plan – and actually, a shock to the financial system would only provide a headwind to the miners because it would buoy the gold price.
With or without systemic shocks, gold’s trend is decidedly upwards while it consistently comes back to its trendline – and it’s trading below the line at the moment, setting the gold price up for an upswing just as the seasonality boost is about to kick in.
Moreover, the strong gold price rally from July to September will be factored into the miners’ 10-Q reports, providing rocket fuel for mining stocks as one after another, the CEOs report their Q3 earnings and revenues without outstanding results.
Strong demand from central banks and large-scale investors, low all-in sustaining costs, a setup for a gold price rally… the stars are aligning for much higher mining stock prices in the year’s final months. It’s all right there, foretold by the cyclical nature of the market: a roadmap to prosperity for those willing to read it.
Buy physical gold for protection and select mining shares to participate in what I see as a tsunami of profits coming to the gold space.
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This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. We will never sell any shares during any active email marketing campaigns. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.