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Another Gold-Stock Upleg

Apr. 09, 2021 7:17 PM ETVanEck Gold Miners ETF (GDX)174 Comments
Adam Hamilton profile picture
Adam Hamilton


  • Another young gold-stock upleg is underway. GDX has carved a lovely series of higher lows and higher highs in the 5+ weeks since bottoming in early March.
  • This nascent uptrend looks very different technically from the short-and-sharp countertrend rallies within corrections. It is very young-bull-upleg-like, arguing that the latest one is indeed marching.
  • While another young gold-stock upleg in December subsequently prematurely failed, that anomaly was fueled by heavy gold selling. But that massive gold-futures selling is largely spent, looking increasingly exhausted.

The gold miners’ stocks suffered a rocky start to 2021, rolling over into an extended correction after a young upleg prematurely failed. The resulting deeper lows left sentiment overwhelmingly bearish, with this contrarian sector deeply out of favor. But over the last five weeks or so, gold stocks have powered higher again in another young upleg. This one has a far-stronger foundation given the underlying gold setup.

The leading and dominant gold-stock benchmark and trading vehicle remains the GDX VanEck Vectors Gold Miners ETF (NYSEARCA:GDX). It held $14.2b in net assets in the middle of this week, a massive 30.6x bigger than the next-largest 1x-long major-gold-miners-ETF competitor! Several weeks ago I analyzed the top 25 GDX gold miners’ latest quarterly results, which revealed this sector now enjoys incredibly-strong fundamentals.

While gold averaged $1,876 per ounce in the recently-reported Q4’20, the big GDX gold miners reported average all-in sustaining costs of $1,038 per ounce. That implied stellar $838-per-ounce profit margins! That fantastic profitability fueled record revenues, adjusted earnings, operating cash flows, and treasuries at the GDX-top-25 gold miners. That was their sixth quarter in a row of soaring mid-double-digit earnings growth!

But you sure wouldn’t know the gold miners are thriving mightily by looking at GDX’s technical action in recent months. Traders wanted nothing to do with gold stocks in January and February, leaving them for dead. This dirt-cheap high-potential contrarian sector was hated, choked by overpowering universal bearishness. This GDX chart over the past couple years or so highlights this sector’s wild and violent ride.

Last March’s brutal stock panic on economic fears from government lockdowns to slow COVID-19 slammed gold stocks to radically-oversold levels. GDX’s mean-reversion rebound out of that extreme anomaly was neck-snappingly sharp, ultimately growing into a huge upleg. Over just 4.8 months into early August, GDX skyrocketed 134.1% higher! That parabolic surge

This article was written by

Adam Hamilton profile picture
A lifelong student of the markets, speculator, and investor, decades of experience have forged Adam into a hardcore contrarian. He believes in buying low when others are afraid, then later selling high when others are brave. He founded the financial-market research company Zeal LLC, and continues to write acclaimed weekly and monthly subscription newsletters.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

I own extensive long positions in gold stocks and silver stocks which have been recommended to our newsletter subscribers.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (174)

waldipup profile picture
Hamilton just released another article -


"This young gold-stock upleg is accelerating, with fast-rising prices enticing in more capital. This sector has surged sharply to multiple major upside breakouts in recent weeks, which is starting to turn skeptics into believers. Despite their strong upside momentum being chased, gold-stock prices remain far from overbought levels warning of impending selloffs. This mounting upleg still has great room to power way higher."

I used to give his articles more credence , but now think he is more just following price action with his comments .

Nonetheless , informative , plus I like to read that metals are going higher and I'll double , triple , maybe 10x my investment .....
@waldipup, he lacks the gift of brevity.

Re silver, a few months ago he decried the silver miner ETF SIL as having too many mediocre names bogging down performance. Later he evidently reversed himself, providing no explanation for the shift. Several folks suggested that he could analyze or st least mention SLVP, a much cheaper silver miner ETF (which therefore outperforms SIL considerably). Still no word.
waldipup profile picture
@Miners to the Moon


Most of the articles are recaps of past price action -

Which one can derive from a chart in seconds .
@waldipup , Thanks for reading and digesting the entire article for me and then giving me a two word synopsis. The ladder action saved me a lot of time.
waldipup profile picture
Hmmmmm -

Breakout , retest , and follow thru?

@waldipup , Let's watch it again Monday!
@waldipup, was that you buying my paltry 200 shares of NEM today?
waldipup profile picture
@Miners to the Moon Not unless they sold in the 50's .
sliman21 profile picture
At least diversify and buy some bitcoin. Gold bugs bitcoin is the new gold.
@sliman21, I’ll pass, thank you.
sliman21 profile picture
@Miners to the Moon At least I tried. I know it is hard for a gold bug to change its stripes. GLTA
@sliman21 , I'm not a gold bug and I have no stripes...but I'll still pass on Bitcoin!
"That is the holdings of the world’s biggest gold exchange-traded funds"

"It’s no wonder gold wilted on that heavy momentum selloff"

Adam, you've made the same claims many times already in your past articles. This still heavily contradicts data and even your own charts. In your current and previous charts comparing GLD's holdings with the gold price, you can see numerous periods where the gold price leads GLD's holdings rather than the opposite. So which data leads which data again? In Jan 2017, there was a 7.7% rise in the price of the GLD, which means people have been buying. Yet, since gold bottomed, GLD's holdings have fallen another 4.6%. It fails as both a leading and a lagging indicator. There are countless other examples outside of this Jan 2017 example. This indicator is very useless as proven by its track record. Also, the gold exchanges completely dwarfs GLD's movements. GLD's movements are so very insignificant compared to the overall gold market.

"a great real-time proxy representing it is reported daily"



Again Adam? Daily, even in great detail, doesn't mean much when there is absolutely no way to verify any of it. I still have yet to see any verifiable evidence to support any of these claims. I've always found GLD's holding reports to be questionable at best. GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. For anyone interested but have not heard, I recommend looking into CNBC's Bob Pisani making a highly publicized visit to GLD's gold vault in a segment called Gold Rush: The Mother Lode. GLD's management organized this visit to show that GLD's gold actually exists. However, the gold bar held up by Mr. Pisani showed a serial number of ZJ6752 which did not show up on the latest bar list during that time. It was later discovered that this "GLD" bar actually belonged to ETF Securities.

Even on the subject of GLD's insurance, they are not at all straightforward about it. Their representatives will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors? The people behind GLD certainly do not seem like the most honest types.
@Gary_MacDonald , Have you thought about investing in McDonald's @Gary_MacDonald ?
moxy81 profile picture
Great article!!! Market wnt ignore the fact forever that this secter is the cheapest in market, there making money, with increasingly strong fundamentals!! I truly believe the next bubble will be in miners n precious metals equities.
@moxy81 , When might that be?
The Enforcer profile picture
great article, thanks!
waldipup profile picture
Thanks , but you're just guessing .

And when you're finally correct -

You're a genius ?
@waldipup , Go ahead and be a genius anyway!
necto profile picture
agree. thank you for article Adam.
What are we shooting for 20k an once gold?
@Positive777 y9ou must be joking . 2K is nothing nowadays. Notice at end of year when tax time comes the good ole government who is practically broke will be down over 10T dollars and guess who has to pay off the debt.
Us stockholders in the long run.
waldipup profile picture
@johnny corsaro Yeah but for how many years (DECADES!) now has that been the assumption ?

Meanwhile , while we're pontificating about gold , imaginary bitcoin's 60k .
Steve in TN profile picture
The GDX chart sure looks like the start of a major move to the upside. In addition, SIL, the silver miners ETF is also showing signs of a bottom with the completion of a triple bottom at the beginning of the month. The key for me for a bull leg of the miners is the drop in real 10 yr treasury interest rates. I expect the yr over yr inflation rate to jump in April & there is a strong possibility of the 10 yr Treas. to fall to 1.5%. If this happens it'll be like lighting a fuse under GDX for a major move upwards.
@Steve in TN, good points all. I prefer SLVP to SIL - it outperforms because it sports a much lower expense ratio.
@Steve in TN, added more SLVP Friday.
sliman21 profile picture
Bitcoin is eating gold's lunch. Sorry
@sliman21 what are you talking about? Its eating every asset class' lunch. With the exception of gamestop maybe.

Alts are eating bitcoins lunch

I love crypto and am heavily invested in alts.

While there is 'some' migration to btc from gold, most of the tc money is coming from broader supply base like institutional warchests not previously exposed to gold.

Negative real rates are golds main issue, not some simplistic kneejerk coinbase and binance anti gold marketing spam.

They are not mutually exclusive.

They are merely the analog and digital version of a similar store of value. Both have their place in a prudent investment portfolio.
Long term gold chart show a distinct cup and handle formation....the handle still looks a little small so I wouldn’t be surprised to see another big dip down to 1600 level, before the bull run up to and beyond record highs. Gold stocks at current levels are ridiculously cheap vs the broader stock markets, free cash flow generation and debt reductions should mean an easy double for most miners as the rising tide lifts them all...even the leaky ones,t

I think inflation will mess with perfect charting..
@Positive777 maybe...but Elliot Wave enthusiasts believe the charts..I.e technical analysis, accuracy far outweighs fundamental analysis....gist of it is the markets follow herd sentiment and EVERYTHING else is just noise. If you get a chance have a look at some of Avi Gilbert’s posts.
I think, dilution of dollars, I.e. MMT seems to be the new way to appease the masses and export dollar based inflation...this won’t last forever, last year 21% of ALL US dollars that have ever existed....EVER, we’re printed/ created. This has to cause asset price inflation to spike at some point..... I believe in Land/farms and Gold and Silver....all the best,tony
@tonyconnolly , I believe in farms because they grow food.
The gold COT report is looking good: @Miners to the Moon


Money is pouring into the markets :

"A record $576 billion has flown into equity funds since November -- more than the $452 billion seen in the last 12 years combined, all thanks to ultra-easy monetary policies and unprecedented stimulus."
@kimbillro, @tonyconnolly’s double from today’s close means $ 123
NEM, $ 122 AEM, and $ 67 PAAS - each level would easily smash
their all-time highs ($ 80.9, $ 89.23, and $ 42.65, respectively).
Even little HL would hit $ 12.

Now can anyone tell me when? Just curious - these levels seem so extraordinary.
@Miners to the Moon that’d be the $64,000 question. My best guess Is within the next three years, as the $ dilution bites. Large caps should be an easy double, with some of the small caps five times better...thinking of Wiluna, Perseus, Golden Valley Etc, tony
@Miners to the Moon , I will have an answer for you next week after I rest for 3 days.
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