Are gold stocks primed for another leg up? On surface level, that notion seems utterly ridiculous. The yellow metal’s spot price fell 1% to close last week, while it has lost roughly 4% of its value since June 6. Because of the recent ugliness impacting gold prices, the traditional safe-haven asset is up a mere 6.5% year-to-date.
Such a pedestrian performance has disappointed investors in gold stocks, who were hoping for a reversal of fortune. Since going parabolic in the commodities super-spike in 2011, the precious metals have had a tough time justifying themselves. Through supposedly favorable fundamental tailwinds — economic uncertainty and geopolitical tensions, in particular — gold prices stubbornly fell.
Yet the contradiction between the fundamentals and the technicals may not last much longer. Bloomberg reported that gold volatility is near ten-year lows despite raging geopolitical instability. In late June, an extremely large sell order was issued, sending gold stocks plummeting. But the sharp contrast between the sell order and market logic suggested that an erroneous trade was at fault.
Whatever the cause, the damage was done. The panic in the commodities market triggered automated sell orders, creating a snowball effect. Even if the fundamentals are supportive of gold stocks, the bulls will experience trouble pushing past the automated orders.
Still, I remain optimistic. As Susanne Barton and Eddie van der Walt reported on the July 3, 2017 edition of Bloomberg Businessweek, the selloff may be the result of gold manipulation. If so, bullion investors can take solace in that once the shenanigans are over, gold prices may spark another rally.
Should the fundamentals reassert themselves, look for these four gold stocks to take advantage.