Whilst the whole world watches the Oil saga playing out, there’s a little bit of action happening with Gold prices that many are missing out on. Gold has risen from its 5 years low in late 2015 to test the underside of the support low from this time last year.
Whilst that is no significant Gold rally, in terms of what was seen in years gone by, it’s sure waking up some lowly mining stocks from their sleepy slumbers.
The GDX (Market Vectors Gold Miners ETF (N:GDX)) has come to life, and yet because of the pressure in this area over recent times, it seems not a blip on the radar. However, some of the main constituents are in a prime position to make abnormal gains if Gold prices can continue to hold strong.
It’s been a long 4 years for these companies, and many changes have occurred. The “best” of the bunch have had to streamline their operations to stay in business. Many have taken steps to lower their break even on Gold “out of the ground” to less than $900 per ounce. Meaning any significant rise in prices will go direct to their bottom line.
It’s a market cliché to say Gold is a safe haven in turbulent markets, but in an economy where rate hikes may have to be stalled due to stagnant inflation, then in turn stocks will become more volatile and investors more fearful. In this scenario Gold will bloom.
The Federal Reserve wants to stimulate a little inflation, and it looks like they will get their way. The Dollar is weakening in anticipation of what is coming, and you can place your bets on Gold anticipating a move too.
So what does 2016 hold in store for Gold?
Truth is, it’s hard to say. Any market commentator who “thinks” they know, really probably doesn’t. But one thing has a high probability, and that is Gold will be higher than it is right now come the end of this year.
The key point to watch is 2015’s spring highs. Around the $1230 level became a resistance during the first half of last year. If Gold can retest that level and break through, then it could be time for some serious Gold action.
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