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Gold Mining Stocks About to Bottom
Pinnacle Digest writes: Did you know gold mining stocks are about a week away from bottoming? If history is to be our guide, next week gold mining stocks will hit their summer bottom. For the last ten years, late July has proven to be the most bearish time of year for gold mining stocks and bullion (on average). Despite this well-documented statistic, the summer doldrums, and more particularly, the last week of July, marks the peak of pessimism for gold and related equities.
In Adam Hamilton’s latest article he breaks down some startling statistics on precious metal stocks (gold and silver mining stocks) and their performance during the summer doldrums (June, July and August). Hamilton mentions that, unlike every other season of the year, where gold has a catalyst to move up in value (cultural buying, investment demand, income cycles etc.), the summertime provides no spark in buying. And although this fact is widely known amongst the investing world, sentiment is crushed for gold mining stocks and the price action lags (flatlines for nearly three months).
Key note: Given that gold is the main driver for the precious metal sector, its weak demand in the summer negatively effects silver as well.
In Hamilton’s article he shows how poorly gold has performed over the last ten summers (he provides very telling customized charting). Hamilton states that “on average this metal has spent summers drifting from 2% below to 2% above its market-summer starting point at the end of May. A 2% move either way over a 3-month period is hardly noticeable, essentially purely sideways.”
Hamilton also explains how gold mining stocks typically swing twice as much as bullion (validating the leverage theory) in the summer months.
Hamilton mentions that, despite the blatantly obvious statistics, which tell us that gold is going to do nothing in the summer months (including gold mining stocks), he finds it amazing just how easily traders give up on precious metal stocks this time of the year. With that said, he explains how the final week of July marks a turning point. It is the most bearish point of the summer and has marked the best time to buy gold stocks as they typically rally very well in the fall and winter.
In Hamilton’s article you’ll see exactly why it has paid handsomely over the last decade to buy gold mining stocks in the final week of July. It’s time to go against the crowd and be a contrarian.
Click here to read Adam Hamilton’s great article on the seasonality of gold mining stocks.