Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
Recently, the price of gold surged to a record high, with gold futures closing up 0.97% at $2186.20 per ounce last Friday. However, economists and gold bull Peter Schiff stated last Friday that despite the significant increase in the gold price, gold mining stocks have remained stagnant. Nonetheless, it is anticipated that gold stocks will soon see a rebound, prompting investors to position themselves early.
Specifically, gold mining stocks traded relatively flat on Friday, with the VanEck Gold Miners ETF (NYSE: GDX) closing up 0.10% at $29.64, while the VanEck Junior Gold Miners ETF (NYSE: GDXJ) declined by 0.42% to $35.93.
The lagging performance of gold stocks compared to the price of gold has been attributed by Schiff to crypto assets drawing funds away, as investors sell off mining stocks in favor of bitcoin ETFs. However, he expects the price of gold to gap higher at $2200 on Monday, with the likelihood of this prediction becoming reality increasing if the price of bitcoin experiences a significant drop over the weekend.
David Erfle, Editor and Founder of Junior Miner Junky, also holds a positive outlook on gold stocks. He noted that while there has been a disconnect between gold prices and gold stock prices in the past, the magnitude of this divergence during a breakout in gold prices is unprecedented in his experience.
Erfle highlighted that the HUI gold ratio reached 0.09 and 0.093 at the lows of the first two weeks of 2016 and March 2020, respectively. Then, on the Wednesday before last (February 28th), the HUI gold ratio reached 0.094, signaling an imminent mean reversion for gold stocks. On the previous two occasions when mean reversion occurred, the stock prices of many junior miners and producers experienced substantial gains over a six-month period.
The HUI gold ratio refers to the ratio between the Gold Bugs Index (HUI) and the price of gold, typically used to measure the correlation or performance comparison between gold mining stock prices and the price of gold. An increase in the HUI gold ratio indicates strong performance for gold mining stocks, potentially surpassing the rise in gold prices. Conversely, a decrease in the HUI gold ratio suggests poorer performance for gold mining stocks, potentially lagging behind the increase in gold prices.
Brien Lundin, Editor of Gold Newsletter, also shared his perspective on gold and gold stocks for 2024.
In his view, the Fed will initiate interest rate cuts, with other central banks following suit, leading to an uplift in gold prices. Based on this assessment, he advised investors to take profits from uranium stocks and invest in junior mining stocks for gold and silver. Lundin emphasized that once the price breaks out, stock prices will rise very rapidly. Therefore, to seize the opportunity of the rise in gold stocks, investors must strategically position themselves early, buying these stocks before the fear of missing out sets in.
