Gold Miners On The Wall Of Worry As A Key Catalyst To Bring Them Into The Gold Bull Market Approaches

Featured companies in this report include Agnico Eagle, Alamos Gold and SilverCrest Metals.

With the gold miners about to report the best quarter for gold prices ever, it is somewhat surprising that the GDX (which is a good proxy for gold miners) is trading below the 50-day moving average. Not shocking because the sentiment for gold miners is still down in the dumps, despite the GDX trading well above the 200-day moving average.

Prior to the 2024 PDAC in early March, the gold miners had been experiencing a bear market that had them trading like zombies. Then gold blasted off and several gold miners got off the canvas. Which means that sentiment toward the gold stocks improved, but they are still climbing a wall of worry.

The chart of the GDX above is going back to 2020, it gives a pretty good picture into why the gold mining stock investors are worried. After topping in 2020, the stocks of gold miners went into a significant correction until the early 2022 relief rally. After the relief rally they got hammered until the last quarter of 2022.

Another relief rally over the ensuing few months took place and then more softness. Something interesting happened in the softening period as the gold miners bottomed out a higher low than the lows of 2022.

Then in early 2024 they blasted off, which coincided with the remarkable rally in the price of gold. The gold miners’ stocks went through a Golden Cross with the 50-day moving average moving well above the 200-day moving average. Just recently, the GDX has traded slightly below the 50-day moving average for the first time since the Golden Cross.

The recent action has caused some long suffering gold stock bulls to worry that another correction is coming. The low conviction gold stock bulls and bears have a more ominous tone. I see a major catalyst immediately in front of us that will play out over the next few weeks.

The second quarter of 2024 will have the highest average price of gold ever for a quarter by a significant margin. This will bring in windfall profits for several gold miners.

Gold has been performing exceptionally well since the bottom in late 2022. But the gold miners haven’t really joined the party yet. This is all about to change as they report windfall profits that will catch the attention of generalist retail investors, large generalist investors and institutions. The gold miners are primed and ready for a major move to the upside.

Oftentimes when a key catalyst is forming, the stocks will start pricing it in well before the event. We are only a couple weeks from the end of the second quarter, yet the catalyst of windfall profits for gold miners has not even begun to be priced in.

Nobody can make the case that windfall profits aren’t coming for the gold miners. But, the investment opportunity is due to the wall of worry, the gold miners haven’t started to price them in yet. I think they will before the gold miners start reporting their second quarterly reports. Although it wouldn’t shock me if the generalist crowd waits until they do. Either way, the catalyst to see the gold miners join the gold bull market is locked and loaded.

There are a few ways to play this action. The marque names that generalist investors think of are Newmont and Barrick, they will also use GDX to get exposure to the gold miners.

Plenty of generalist investors will go with the GDX, I think that is a poor choice as you get the great, good, okay and lousy all mixed into one. Others that want to pick individual stocks will be attracted to Newmont and Barrick because they are the household names to generalist investors when they think of gold miners. I wouldn’t go with any of these because I think there are better options.

For those that want one of the top 3 gold miners, Agnico Eagle is number 2 and they are my number 1 pick of the three. In the past two quarters, they have reported record production, record reserves and record free cash flow. They have performed much better than number 1 gold miner Newmont and number 3 gold miner Barrick.

While Newmont is digesting the takeover of Newcrest, and Barrick had lower production and higher costs in the first quarter, Agnico Eagle was firing on all cylinders. In the second quarter they will see approximately $300 more per ounce of gold than they received during the first quarter.

The second quarter will be a knock it out of the park quarter for them, so I have a lot of confidence that the trend of them outperforming Newmont and Barrick will continue. The only thing that could make it even better is if they report that they are sitting on some of their gold production. They have plenty of cash, a lot of investors would be more than impressed if they hold some gold as well.

Another one that I think will be an outperformer relative to their peers is Alamos Gold. They are producing gold at well below the average cost of production for the gold mining industry. Plus, they are increasing production and bringing down costs, while also putting money into replacing the gold they mine with great success. That is a combination that few gold miners are able to accomplish.

In the first quarter, Alamos had record production and strong free cash flow which is about to get a lot stronger in the second quarter with gold approximately $300 more per ounce quarter over quarter.

They have a tremendous story to tell about where they are now and their near term growth plans. I would love to have them on Rocks And Stocks News for an interview to tell it to our audience. I have reached out to them inviting them for an interview, unfortunately I haven’t been successful.

Based on their low production costs and their healthy margins that are about to grow in the second quarter, I can see them soundly outperform the GDX, Newmont and Barrick in the second quarter.

I recently wrote a report about SilverCrest Metals, one because their Las Chispas mine is generating remarkable free cash flow. Plus, they are a unique example to their peers, in addition to rapidly growing their cash position, they are also holding onto a significant amount of their gold and silver production.

I wish more gold and silver miners weren’t in such a rush to sell all of their production for cash and stockpile some of their production. SilverCrest has been doing this for a couple of quarters now and it is paying off for them with gold about to have its best quarter for the price and silver has rallied significantly as well.

They have a low cost of production, they mine high-grade and Las Chispas is a free cash flow machine of a mine. I would expect that they will deliver exceptional results in the second quarter and also grow their stockpile of gold and silver.

This is another company that has a remarkable story to tell and I would love to have them on Rocks And Stocks News for an interview. I have reached out to them several times, without success hearing back from them.

For those that want the potential for a gold and silver miner that will outperform the GDX, Newmont and Barrick, SilverCrest is a great candidate.

In Closing

I’m a big fan of McEwen Mining, on Monday I have a scheduled interview with Rob McEwen that I’m looking forward to. He always gives us great information about the progress at McEwen Mining, gold and copper, as well as the investment opportunities in the mining space.

Next week, I have a new sponsor to announce and I’m working on the introduction report to discuss why I invited them to join my sponsorship program. They are an explorer, with a great land package in the Golden Triangle. They are early in their exploration drilling, so far they have hit impressive results in their early drilling. Yet, they still have a tiny valuation of less than C$10 million with almost half of their valuation in cash. They are cashed up for drilling and about to get rolling soon.

I have an interview scheduled to come out on Tuesday or Wednesday with one of my sponsors. They are focused on gold and copper exploration. I’m looking forward to talking with their management about recent work they have completed.

I’m also working on a report about the most misunderstood junior miner that I follow. It should also be out next week.

In addition, I see things lining up for gold to make a significant breakout to make a move to $2500. I hope to have some reports out next week about the breakout getting underway. When gold breaks through $2400 (my Spidey sense tells me that could be next week which will be imminent danger for the gold shorts) then it will be clear sailing to $2500.

All the best,

Allan Barry Laboucan

Disclosure

Rocks And Stocks News does not make buying or selling recommendations. The reports are for information purposes only. Sponsors pay a fee to Rocks And Stocks News for content creation. The business model of Rocks And Stocks News is to fund research and reporting on the sector, picks and sponsors through corporate sponsorship. We are thankful to sponsors for enabling commentary free of charge to readers and viewers of the reports. When reporting on sponsors it is on behalf of the sponsors discussed in the portion of the report mentioning the sponsor. Before making any investment decision it is important for you to speak with your financial advisors to consider your risk profile. It is also important to do your homework. To help in that process, Rocks And Stocks News means to be a gateway by doing reports and interviews of management of sponsors and picks. The reports and interviews should not be considered investment advice. Allan Barry Laboucan is the founder and owner of Rocks And Stocks News, he has worked in the mining sector since 1993 and has been reporting on the sector since 2005. He has worked with and been mentored by very talented geoscientists in geology, geochemistry and geophysics. He uses the skills he has picked up during his career to assess sponsors and picks in the reports. Whether a company is a pick or a sponsor they go through the same filter and are reported on when important news is made that Allan Barry Laboucan wants to discuss on the Rocks And Stocks News platform. He may own shares in sponsors and picks for investment purposes which he discloses when discussing them in the reports.