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Thomas Dionian
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I am an active investor in my own portfolio seeking opportunistic market displacement and special situations in the markets. I have experience successfully investing in oil, natural gas, gold, technology, financials and social media in both long/short equity and ETF's. I have been investing for... More
  • Gold Miners Have Topped Out - Hard Reversal Coming 4 comments
    Feb 17, 2014 11:02 AM | about stocks: DUST, GDX, NUGT

    Gold...it is as unstable and unpredictable as your most volatile relationship after a night of heavy drinking. It can end up with you in the throes of a crazy night of unforgettable passion still to be remembered 20 years later or with a beer poured over your head, a vicious break-up and a fight with some random interloper at the bar. Either way, you end up with some bumps and bruises!

    I write this article as a response to the recent massive move in spot gold over the past 45 days....rising from 1,200 to a high of over 1,320 this morning - roughly a +10% move. To compliment this, the GDX is up 25.8% over the same time period and NUGT (3x Bull Gold Miners) is up over 78%.

    There are a few reasons cited as to why gold has become "interesting" again to investors - including China's appetite in 2013, concern over U.S. recovery and underweight portfolio managers at the beginning of a new capital cycle. The argument for the miners is even less compelling…it essentially rests almost solely on the idea that miners have been so beaten up over the past few years that they should now be positioned for recovery. This argument is preposterous given the horrific performance that miners are still enduring and their weak and outright dangerous financial standing.

    I would contend that this is a big setup and gold bugs are about to get an entire pitcher of beer poured on their heads....and there will be no passion to be remembered this time....only a significant and brutal kicking of the proverbial behind.

    I would encourage those getting sucked into the "gold vortex of irrational thought" to take a step back on view the facts. Ignore the articles and pundits arguing how gold is going back to 1,400 or 1,600 or 2,000. Ignore those spouting how Gold Miners are now starting to look good at these - the lowest of levels. You want to know why?

    Because the move up has already happened. Whatever buying opportunity Gold and Gold Miners were going to experience in 2014 is over. A basket of Gold miners which includes KGC, GFI, PPP, ABX, RIO, GG, AUY, IAG, AU, GOLD, NEM, EGO, BHP, SWC and RGLD is up over 40% from their 52 week lows on average (see Table 1.0 - Gold Miners)

    Miner52 Week Low14-Feb% Above 52 Week Low
    KGC4.235.2624.3%
    GFI2.924.0739.4%
    PPP4.066.8268.0%
    ABX13.4320.6954.1%
    RIO39.1458.7050.0%
    GG20.5427.9336.0%
    AUY8.3110.6127.7%
    IAG3.154.1632.1%
    AU11.1417.5657.6%
    GOLD59.1980.0835.3%
    NEM22.3424.148.1%
    EGO5.357.2235.0%
    BHP55.6668.4022.9%
    SWC9.7813.2435.4%
    RGLD38.6368.2876.8%

    Table 1.0 - Gold Miners

    Gold is up 10% from a 'disastrous' 28% decline in 2013. As referenced earlier, gold indices are spiked up massively in the past 45 days. Yet, fundamentally, the U.S. and Europe are continuing to stabilize, the dollar will continue to get stronger with tapering, China's buying spree on gold will decline in 2014 and interest rates in the near term will not support a higher inflationary environment. Simply put, there is no real support for what has occurred in gold and miners over the past month and a half other than speculation.

    So do yourself a favor…short GDX, short NUGT or buy DUST and position yourself properly for a significant win in 2014. This short-term rally in gold and gold miners has offered a significant shorting opportunity as gold marches on to its proper price levels in a more stable economic world - sub 1,000 per ounce. Then go pour yourself a beer, drink it, and see if you can spark some new passion with your significant other.

    Stocks: DUST, GDX, NUGT
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Comments (4)
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  • $DUST
    , contributor
    Comments (51) | Send Message
     
    Irrational is the word. Especially when it comes to miners. Who in their right mind invests so heavily when miners are reporting horrendous losses on their Q4's at right about now. Even if you buy on future prospects, what is happening now is just MAD WORLD!
    Will be adding on dips to DUST. $1360 has to be the ceiling if it gets there. DUST at $16-$18 will be irresistible, with a potential pop back to $24 and above.
    18 Feb, 01:17 PM Reply Like
  • adawg304
    , contributor
    Comments (41) | Send Message
     
    Here's your chance.
    13 Mar, 11:49 PM Reply Like
  • Special Situations and Arbs
    , contributor
    Comments (539) | Send Message
     
    when things look worst it often is the time to buy a sector. Nobody ever really knows when a bottom is in....however I continue to rank gold miners as the number one sector in 2014 and even after a great start I would expect large gains from this point on. I am long EGO, AUY,RGLD and NGD
    13 Mar, 11:53 PM Reply Like
  • jaginger
    , contributor
    Comments (475) | Send Message
     
    Short $DUST from $45. Loving it.
    14 Mar, 09:08 AM Reply Like
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