Dave Erfle – Junior Mining Volatility On The Back Of Portfolio Rebalancing In The GDXJ And SILJ
Dave Erfle, Founder and Editor of The Junior Miner Junky, joins us to outline the impact that the portfolio rebalancing in both the GDXJ and SILJ Van Eck ETFs have had on many junior mining stocks, and how those ETFs are now even less correlated with the actual junior PM stocks. We also discuss the evolving trends in passive versus active resource stock investing, and key support levels and catalysts for gold, silver, GDXJ and SILJ.
As markets have moved higher to 52-week highs the gold and silver stocks have continued to underperform, but Dave sees a setup coming where both of those trends could reverse, and he even highlights the recent short positions he has taken out on the general US equities. We unpack how Newmont Mining, the world’s largest publicly traded gold company, has started to diverge from both gold and GDX in a constructive manner, and then wrap up with other catalysts that may encourage more generalists to position in this sector.
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Click here to visit the Junior Miner Junky website to follow along with Dave’s market commentary.
Probably completed at this conference June 19-21. I’m perfectly fine with a sale for a few bucks, takes the risk out of building a mine… it is an exploration company and has a window open to sell itself, the talent involved will move to the new entity.
In view of price intervention, it would be the perfect time to buy (steal) an explorer by managed money.
I remember not long ago they reported Rhodium in there mineral estimates… hmmmm, not so lucrative now.
Sibanye must have a huge depository of cash, this doesn’t look good unless somebody else wants PGE, but that would foretell a movement by a bigger shark to eventually take-out Sibanye. Interesting times but not always profitable. DT
Same every day. “Same” can not be a free and fair market.
Off topic, Baytex, BTE, divvy and buybacks to come…
https://www.baytexenergy.com/content/uploads/newsFile/1687285380-170680.pdf
Looks like CNBS shut down covering The Fed hearing when the questions started highlighting the damage of “deregulation” and “transfer of wealth”. CNBS has decided to let us know what we need to hear. Doo-Dah, Doo-DAh…
A lot of investors have given this stock up for dead but not me, I have taken a lot of flak over buying PGE but I’ve got my hip waders on, and I can take it. This mud puppy will come back to life! We could see the halt lifted after the market closes. LOL! DT
I’m still in Stillwater Critical Minerals as well DT, and haven’t given up on it either, as there is an insane mismatch in where they are valued and value of their insitu metals in the ground based on what they’ve already demonstrated (much less after another season of drilling).
One can only speculate as to what the reason for the trading halt in PGE is (new strategic partner? financing? government grant for critical minerals? hopefully it’s not a takeover offer at these low levels….).
I’m sure whatever the big news is, then we’ll be having the CEO Mike Rowley on to discuss it. Stay tuned…
Ex, you must get Mike Rowley on, I need an update! Thanks DT!
10-4 good buddy. Will do.
David Erfle’s interviews are always a must listen.
Unfortunately, the junior mining investment sector is in a coffin ready to be interred, with a small group of grumpy old men playing a game of TSX poker-monopoly on the coffin lid. The shenanigans with PM ETFs is a nail in the coffin. The complete disinterest (and hatred) by “the generalist investor” in the “dirty resource extraction” sector is another nail in the coffin. The myriad of EASY synthetic trading possiblities, to leverage the silver/gold price volatility, is just another nail, too.
For the long term, the coming wave of resource nationalism (or resource colonialism, based on your perspective) is the only reason to remain in this sector (a.k.a., “Critical Minerals”). Incomprehensibly, neither Gold nor Silver is CURRENTLY on either the United States or Canada lists. I wonder why?
I completely understand that sentiment BrianE, as it has been mostly resource investors trading amongst ourselves for some time now… whether that changes with a decisive break above $2100 in gold remains to be seen, but a breakout move in price to all-time highs would generate headlines and likely light a fire under the sector.
The issue is that most analysts are still tying a move like that in gold to new highs to a recession and worse economic data coming in and forcing the Fed’s hand to start cutting rates. So far that has perpetually been staved off, with continued “better than expected” economic data reports and earnings seasons, and thus those estimates for when Powell will pivot and start cutting rates have continued to be pushed out further and further into the future.
Sentiment in gold and silver stocks has been scraping along bottom for a while now, but there have been some good rallies along the way for those that capitalized on oversold levels and then lighted up on overbought rallies using the shorter-duration charts. It’s definitely not been easy sledding though, and traders have had to be nimble and act decisively on entries and exits to make in progress over the last 2 years and capitalize on those rallies before they reversed course once again.
Longer term holders of PM equities have had a pretty rough go of it though (which is why for over a decade now, buying and holding volatile PM stocks has not been a winning strategy. The gold and silver miners have not been the oft-quoted Jesse Livermore “buy right and sit tight” type of stocks. He was talking about blue chip stocks in general equities anyway, and not advocating that for commodity stocks, much less junior PM stocks, so his advice has often been taken out of context for a long time now. It’s no different with oil or nat gas stocks, or fertilizer stocks, or grains, or iron… they’re all cyclical by nature with ebbs and flows, and should be traded accordingly… making hay while the sun is shining, and reducing exposure for when they go where the sun doesn’t shine….
Regardless, the sector sentiment in the juniors is back to nearly as bad as was last summer in July and last fall in September, but not quite there yet as the mid-tiers and royalty companies have still held up comparatively, keeping things from getting quite that bad in market breadth. Still most investors that still follow this space are resistant to putting new capital to work (many are already fully deployed at this point…) and there is no reason yet for generalists or even speculative hot-money investors to sit up and take notice. Most of the folks we are talking with expect that to change after we see gold break out to new highs, but with so much action in other segments of the markets, it’s going to take something bigger to bring in more outside investors.
Many technicians and sector thought leaders are still suggesting we may have a few more sluggish months in the Summer doldrums, where the action in the general markets is giving generalists no real reason to consider alternative speculations like the mining stocks. Good grief, it feels like we’ve been in the summer doldrums already the last 2 months, but Summer just kicked off today on the Summer Solstice. It definitely was a “Sell in May and go away” seasonality thus far, and indications are that it still could be a long row to hoe for this harvest season. We’ve seen markets and periods of time like this before though, and they are typically followed by aggressive moves to the upside when the sentiment shifts.
However, as you rightfully mention, in the resource sector there is quite a bit more interest in Battery Metals, Energy Metals, and Critical Minerals that are in short supply for most sovereign nations. PMs are not really in short supply in that same sense, and thus they are not considered critical for the buildout of the greener energy network, or privy to the same kind of government funding like Lithium and Nickel and some of the more obscure metals are receiving. At least that has been a bright spot in the metals space over the last 2 years.
Like other ETFs in the space SIL looks like it could turn here or very soon. Among other things, the current move down has been weaker than the one that ended last month and such 5th waves are often truncated…
https://stockcharts.com/h-sc/ui?s=SIL&p=D&yr=0&mn=11&dy=0&id=p59070844268&a=1424519799
Silver now has a Fibonacci “618” a-b-c correction and has tested its 100 week MA for the first time since talking it back in March. It fell just short of doing so in May. It finished the day above fork support but let’s see if it can stay above it for the weekly close.
https://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=1&mn=9&dy=0&id=p88383360147&a=1431141230
The current negative sentiment and bearish theorizing is exactly what we should expect near every major low. New players or those with perpetually short memories love to come up with reasons why “it’s different this time” but the are never right and never will be.
I doubt that this will be a year of “summer doldrums” since the last 2 summers were pretty bad and the current technical setup is much more conducive to a low sooner rather than later. The “sell in May crowd” is present every year but it doesn’t always have its way, especially in this sector. Regarding conventional stocks they probably will be correct this year.
The rebalancing by SILJ and GDXJ doesn’t bother me at all. They WILL eventually take the juniors back and those who buy them now will appreciate their willingness to buy them at much higher levels in the future.
Look out below for the whole stock market if MSFT and AAPL roll over.
https://stockcharts.com/h-sc/ui?s=MSFT&p=D&yr=0&mn=9&dy=0&id=p53768708752&a=1438892878
Craig Hemke, Silver/GDX correlation…
https://goldseek.com/article/comex-silver-and-gdx-gold-and-silver-price-analysis
Both offer logical first steps when looking for leverage to the gold price.
Stillwater Critical Metals (V-PGE) has been halted on news, I hope it isn’t a takeover offer, PGE is way too cheap, and I have been in it for way too long, but you just never know. If I was a producer like Silbanye, this is when I would make a move. DT