Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Junior Gold Mining Stocks From Distress To Misery For Investors

Commodities / Gold and Silver Stocks 2013 Jun 21, 2013 - 01:28 PM GMT

By: Bob_Kirtley

Commodities

Gold prices have been taking a pounding of late with today’s session on the NYSE witnessing a close of $1277.80/oz, with poor man’s gold, silver, closing at $19.82. The gold Bugs index (HUI) also took it on the chin losing around 7.5%.

With this environment as a back cloth it is understandable that the juniors in this sector also had a torrid time with Market Vectors Junior Gold Miners ETF (GDXJ) losing 9.78% to close at $9.32. So it begs the question; is GDXJ now a buy?


As an investment vehicle this ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index. The attraction of this fund for investors is the ability in invest in a myriad of small to medium sized companies in the gold and/or silver mining space. The fortunes of this fund are in turn predicated on gold and silver prices maintaining price levels that are profitable to mine. 

The GDXJ Chart

The above chart depicts GDXJ’s fall from grace. We could analyze the technical indicators, but at this juncture it is the high level of sell orders in the paper market and the low level of sentiment that is driving prices south and until that thirst is slaked there could be more selling to come.

Financials

GDXJ trades on the NYSE and has a market capitalization of $1.38 billion; a 52 week high of $25.66 and 52 week low of $9.26, the liquidity is good with around 3 million shares traded per day, although it can spike dramatically from time to time. There are 133,600,000 shares outstanding. The dividend payment has experienced rather an erratic performance so far, $2.93 in 2010, $0.03 in 2011 and $0.75 in 2012.

We should also note that some of the juniors are running low on cash and may need some help from a friendly banker to keep them in the swim, getting a loan won’t be easy given the current state of play.

Conclusion

We have looked at GDXJ a number of times in the past, more recently was in December, 2012 in an article entitled; Junior Gold Mining Sector: Distress For Investors? where we concluded; “for now this investment does not appeal to us, we do not own it and won't be buying it any time soon.”

At $9.32 it could be argued that it is cheaper to buy GDXJ now, however, that does not mean it is a bargain, it can still go lower. You have only to scan this financial landscape to see any number of good quality mining stocks trading at half the price they were a year ago.

Also remember that the cash costs of production have been increasing at a fair pace and can be as high as $1200/oz to $1300/oz, so unless there is a rapid recovery in both silver and gold prices, a number of mines may have to close. Yes this would take some of the supply off the market but there would be a time lag before this impact was felt.

Other considerations are the summer doldrums, a rather slow period for the precious metals sector, so our expectation is for further weakness, unless the dead cat dollar falls out of bed.

The NFP jobs numbers appear to satisfy our political masters which have led to more talk of tapering QE, which has certainly put a cap on gold’s progress. This may change given the reaction of the DOW, down 353 points today and the current economic fragility that exists almost worldwide. We will cross that bridge if and when it comes, but for now we have a down trend or retracement in place, until it comes to a halt we will trade accordingly.

As bulls we can sit it out and hope for this period of consolidation to run out of steam or we can recognize it for what it is; an opportunity to trade on the ‘short’ side. If you are not one of the giants in this field then you are small enough to adapt rapidly and change your trading strategy to match the current trends and make it work for you. This is a time when you use your ‘opportunity cash’ to generate profits or at least to get some insurance against your current portfolio. This strategy is helping us to generate cash and place us in a good position financially at a time when the gold and silver market is being taken to the wood shed.

Once again we can only conclude that GDXJ is not for us and until we can detect a reversal in gold’s fortunes it will stay that way.

On a positive note the summer will come to an end and usually by Labor day in the United States, 02 September, things pick up for the precious metals sector, should that coincide with the exhaustion of the selling, then we could be in for a real treat. The issue then will be about raising enough courage and the cash to hit the acquisitions trail with a vengeance. Start your planning now and be prepared for when the opportunity presents itself.

Take care.

Bob Kirtley
Email:bob@gold-prices.biz

URL: www.silver-prices.net

URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in