SGDJ Could Fall Sharply If Gold Turns Bearish

Summary

• Recently, a speculative process fueled by fears of a financial crisis has seen gold close a significant portion of the gap to the August 2020 all-time high of $2,074.88/oz.
• The speculative process that led to gold's rally appears to have abated somewhat and gold may now turn bearish as prominent central bankers have hinted at additional rate hikes.
• Investors should consider selling shares of the Sprott Junior Gold Miners ETF and lock in profits by taking advantage of high prices, as shares of this fund could fall sharply.
• This fund primarily invests in publicly traded junior gold exploration and production companies. SGDJ is a non-diversified fund.
• A Sell rating for this fund carries the risk that a recession could trigger another gold bull market. However, a soft landing is not a distant possibility.

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Given the possibility of bearish sentiment for gold that would drive the market price of US-listed gold stocks lower, this analysis supports a Sell rating-based thesis for Sprott Junior Gold Miners ETF (NYSEARCA:SGDJ) shares.

The Gold Price Outlook

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.