Dave Erfle, Founder of The Junior Miner Junky, joins us to unpack the all-time high in gold today on the Comex, and the positive longer-term factors setting up in the precious metals sector. We start off by reviewing the bullish technicals we’ve seen lately with the monthly close in February being over the $1900 level, and the strong weekly close over the $1920 and $1960 confirming the move, and noted that GDX cleared the $35 level on closing basis last week. Dave would ultimately like to see a quarterly close above $1975 to confirm the breakout on the longer duration Cup & Handle Pattern on the chart, but longer term the technical outlook is very bullish for gold and the gold miners.
While the recent geopolitical tension in Ukraine has definitely moved Gold, Silver, and really all the metals and commodities higher the last few weeks, Dave points out that these sectors were already running higher before the war broke out. We circled back to the upcoming news on tap with the CPI inflation reading coming out later this week, and the first Fed rate hikes right around the corner this month. Dave reiterated that at this point with the yield curve flattening, record high inflation, and slowing growth forecasts, that this stagflation environment has the central bank really far behind the curve and in a position unlikely to make much of an impact on inflation with a mere 0.25% rate hike.
We look at how the junior miners have not moved as much as the seniors at this point, but we discuss how this is the case at most major turns higher in the PMs and that it is typically the larger companies that can monetize higher metals prices first that get the bid from generalist and momentum investors. Dave pointed to the bellwether majors of Newmont and Barrick as short-term overbought, and that royalty company bellwethers Franco Nevada and Royal Gold have had nice moves higher lately, as well as GDX and GDXJ. Dave is watching a weekly close above $47 in GDXJ to really get more interest and capital flowing down into the Junior miners, but believes sector professionals are going to be booking profits in the large caps and moving down into the micro caps as the bull move unfolds.
Click here to visit the Junior Miner junky website to learn more about Dave’s newsletter.