From Mike Burnick: On Monday, I pointed out that gold is in store for some short-term pain. A temporary period of weakness for the yellow metal lies dead-ahead.
Now, I realize the most-zealous gold bulls don’t want to hear this. In fact, I’ve gotten plenty of “hate mail” as a result of that article. But facts are facts. You can ignore them if you wish. But you only do so at the peril of your investment portfolio.
Pragmatic gold investors will want to exercise some caution and stay alert for volatile swings in the yellow metal — both up and down. However, there’s a definite downside bias over the next few months.
That’s the bad news. But here’s the good news:
The near-term correction in gold, although frustrating to many, is setting up the market for a sizeable year-end rally; One that our E-Wave cycle model expects to continue straight into early 2018.
Lucrative Buying Opportunity
Over the past few weeks, I’ve been seeing bullish relative strength in precious metals mining stocks, compared to the price of gold itself.
That’s where the real buying opportunity can be found nearer-term.
The junior mining shares, in particular, likely bottomed early last month. Since then, the VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ) has been carving out a bullish uptrend (see chart below) — even as gold remains under pressure.
Granted, our cycle forecast does call for another short-term decline for GDXJ; perhaps it already started this week. And the pullback could persist into mid-July.
But then, I expect another move higher for mining stocks going into the late July/early August time frame, as you can see above.
And to support our E-Wave cycle analysis, there’s a very good fundamental reason why the junior mining stocks should outperform gold.
Last month I wrote about the rebalancing of the GDXJ ETF portfolio — and how it was putting the entire junior-mining sector under added selling pressure.
Well, the best news of all for fans of junior-mining stocks is that the GDXJ rebalancing was completed last week. Which means the stocks that make up this index are no longer under indiscriminate selling pressure from Wall Street fund managers.
This should provide welcome relief to GDXJ and boost its share price.
In fact, the last time GDXJ did a major portfolio overhaul like this, the ETF soared 25% higher just one month later!
The GDXJ rebalancing act has created a wonderful buying opportunity in select junior-mining shares with rock-solid fundamentals that just went on sale. And I’m looking to take full advantage of this anomaly for readers of my Real Wealth Report with timely, new buy recommendations.
The SPDR Gold Trust ETF (NYSE:GLD) was trading at $118.99 per share on Thursday morning, up $0.47 (+0.40%). Year-to-date, GLD has gained 8.56%, versus a 8.61% rise in the benchmark S&P 500 index during the same period.
GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #3 of 34 ETFs in the Precious Metals ETFs category.