The long-term trend of Gold stock under-performance vs. the price of Gold is changing, and that’s an important theme investors need to keep in mind to maximize opportunities over the coming months.
Fundamentally, the weakness in Oil prices is a benefit that goes right to the bottom line of producers whose overall cost structures are much more in line now with reality. Canadian-only producers have also been given a huge boost from the rapid decline in the loonie as Gold in Canadian dollars is up almost 15% since late last year.
Below is a fascinating chart from John that examines the relative performance between the TSX Gold Index (SPTGD) and the price of Gold (in U.S. dollars).
Key takeaways from this 15-year chart:
1. There has never been a bigger gap in the relative performance of the Gold Index vs. bullion over the last 15 years – the collapse in the stocks since late 2011 in particular has been profound;
2. The ratio (illustrated in the downtrend channel) between the Gold Index and bullion started to go into decline in 2007 and accelerated to the downside in 2011. The ratio has now stabilized, setting the stage for a turnaround;
3. Note how the TSX Gold Index RSI(14) on this monthly chart has been climbing a trendline since 2013 while the Index itself recently (July 24) hit a 14-year low – that’s a bullish divergence;
4. Note also how there has been a recent sharp increase in the correlation between the Venture and the Gold Index.
The TSX Gold Index lost three-quarters of its value from the late summer of 2011 to last month’s low.
An extensive survey would probably reveal that the average person on the street would want nothing to do with Gold stocks right now. All the more reason to be paying really close attention to this sector at the moment, and the best companies within it.
I have always believed in the value of gold and the days of these lows prices are coming to an end. Fiat currency wars will continue and when the USD starts its’ downward trend gold will move much higher.
I own Novo Resources (TSXV: NVO) as a core position. This will be a modest mine to start at 30k to 40K oz per year, low cost gravity only process, no chemicals involved and an approximate 3 month permitting process once the documentation is submitted by the end of this year. There is NO Native issues that apply. The next NI43-101 is due out in approx. 3 weeks for the oxide resources, which will be processed in phase 1. The economics should also be out before the end of 2015. The cash flow will likely cut-out any future dilution to the shareholders.
Comment by Andrew — August 30, 2015 @ 5:56 pm
As the worlds currency wars heat up more and more people will begin to realize the only money that can not be expanded through the printing presses is gold and silver. Gold stocks often lag or lead the value of gold and as gold’s value continues to go up against fiat currencies the stocks will follow.
Comment by Les — August 30, 2015 @ 6:47 pm
EQT looking strong to begin what should be an interesting week.
Comment by Jon - BMR — August 31, 2015 @ 5:57 am
If DBV finally gets going soon, anyone have thoughts on how quickly before some results are announced, based on the drilling going on prior to the illegal blockade?
I also wonder if DBV has any grounds for a civil law suit against the Tahltan (or if Farshad would even consider that being he seems to want to play nice in the sandbox)? DBV has obviously lost some money here…
Comment by Steve A. — August 31, 2015 @ 6:00 am
I’m hearing the drill starts turning sometime next week on EQT.
Comment by dave — August 31, 2015 @ 6:00 am
Anon not on the sells right now for EQT, maybe they gave up and threw in the towel trying to hold her down.
Comment by dave — August 31, 2015 @ 6:02 am
The volume pretty much confirms the crew jumping for joy last Friday. They obviously stumbled upon something the air missed.
Comment by dave — August 31, 2015 @ 6:05 am
Yeah,looking very good for EQT.The demand is there for sure. Will they be able to keep price down before financing is announced as complete and closed?
Comment by Roger — August 31, 2015 @ 6:21 am
DBV still has H23 and H24 pending. H25 was interrupted by Mr Day. We will be very lucky if drilling starts before the month of October.
Comment by D4 — August 31, 2015 @ 6:34 am
WRR! FINALLY GOT A 2 BID AGAIN….ONE BIG OFFER AND IT LOOKS ALOT CLEANER AFTER THAT…..
Comment by STEVEN1 — August 31, 2015 @ 6:35 am
Good question Roger, its cooling back a little now which is typical. Be interesting to see end of day close. Round trip air to goose bay is $1,000 and I can stay with a family there, I thought about it this weekend, but then again if I drove up to the property they would kick me off. This is one stock I’m not worried about and all in time. Be interesting to see where the price is at the end of 2015. Maybe Xmas comes early.
Comment by dave — August 31, 2015 @ 6:36 am
EQT – This could be a ZEN chart down the road. .12 to $5.00. And Zen did this in a bad market.
Comment by dave — August 31, 2015 @ 6:43 am
Steven – WRR, strong volume on that one too, maybe they are finally getting ready to drill!
Comment by dave — August 31, 2015 @ 6:47 am
Took an initial position in EQT this morning.
Comment by D4 — August 31, 2015 @ 7:18 am
Steve A. Everyone has lost money because of Chief Day and yes it appears Farshad is playing nice in the sandbox , it can’t possibly take seven weeks to get a court injunction against Day.
Comment by Les — August 31, 2015 @ 7:29 am
Rumours on another bulletin board saying that DBV isnt making much headway with their problem…I hope thats not true.
Comment by Steve A. — August 31, 2015 @ 7:30 am
Just grabbed another 40k shares of EQT … it was either EQT or PE … both good choices I think at this stage of the game.
Comment by Paul — August 31, 2015 @ 7:31 am
I guess someone wants some cheap shares, Steve…I wouldn’t put much faith in rumors from another board, but people will believe what they want to believe, or want others to believe…
Comment by Jon - BMR — August 31, 2015 @ 7:34 am
Steve ,if your talking about stockhouse, I wouldn’t believe much of anything that comes out of there.
Comment by Les — August 31, 2015 @ 7:34 am
Paul – they are both good , but EQT goes up a greater percentage first. Just watch.
Welcome aboard D4
Comment by dave — August 31, 2015 @ 7:34 am
Ya, I’ve lost faith in stockhouse a long time ago (not even sure why I go there) – I guess I’m getting jumpy since we’ve been in the dark for a while!
Comment by Steve A. — August 31, 2015 @ 7:40 am
Hopefully we hear from farshad this week!
Comment by Sam — August 31, 2015 @ 7:44 am
I suspect he must be close, Sam…probably either side of Labor Day….either immediately before or after…
Comment by Jon - BMR — August 31, 2015 @ 7:50 am
To me it seems like PE and EQT could move up at virtually the same time. PE is more of a tangible opportunity, while EQT is still quite speculative at this point IMHO. I definitely want to ride the hype on EQT but will be taking profits along the way. But I might let PE ride… Thoughts?
Comment by Paul — August 31, 2015 @ 7:55 am
Steve- that was me. I wasn’t saying that to get cheap shares…..matter of fact I posted that and approx. 1 hour latter I sold 30k shares to start an initial position in EQT because I don’t expect things to get resolved quickly. There are rumours circulating and based off a very recent update, there is way too much cheerleading for DBV and Farshad right now as things are far from being quickly resolved from what I heard. I think Farshad is in over his head with this and my opinion is that he doesn’t have the right support to resolve this quickly otherwise he wouldn’t be in the current situation that he is in! I think we are lucky if we are start drilling before the start October! I’m not bashing as I own almost 1 million shares and this is my core position with almost all my eggs in this basket (added GGI recently and EQT today)……I’m just keeping it real based on the information I just received. We just need to be patient with DBV and most importantly we need to keep our expectation realistic. Bad rumours only lead to more frustration.
Comment by D4 — August 31, 2015 @ 7:55 am
Steve . I have the same feeling about hearing nothing about from DBV . Sure hope Jon is correct .
Comment by Les — August 31, 2015 @ 7:57 am
Jon… would get a better or different answer if you called him vs anyone of us??? Just asking!!:)
Comment by Jeremy — August 31, 2015 @ 8:03 am
and what the heck happened in OIL .. a 2 buck turn in minutes?? any clues??
Comment by Jeremy — August 31, 2015 @ 8:04 am
Based on the volume in DBV stock,there is nothing imminent happening there.Volume will be the first indicator,because news always leaks.
The stock is as cheap as you can get it,and still no one is buying.Jmo,but I’ll be extremely surprised if GGI drills this year.Regoci has been dead quiet again.If he had plans to drill he would be pumping his stock.All he did was include the work on the Grizzly halfway down a PR on his Mexican properties,which doesn’t sound like an allfire gungho drill program is coming unless all the native complaints get resolved.
In that PR,he never said drilling was imminent.He said they would be preparing for a drill program.If DBV doesn’t get resolved,I don’t expect GGI to drill either,and there is nothing going on with the DBV stock,or GGI’s either for that matter, that tells me anything is settled or even close.This is course all just my opinion.
If I’m proven to be wrong,I’ll expect to get hammered.That comes with the territory when you put a negative opinion out there.I’ll also be the first one buying GGI and DBV stock.
Comment by jim niles — August 31, 2015 @ 8:30 am
Thanks for the clarity D4 regarding that comment on stockhouse. Your opinion of the near future with DBV is much different than Jon’s…no offence, but I sure hope Jon proves you wrong!
Comment by Steve A. — August 31, 2015 @ 8:48 am
Jim Niles – I often watch what I say cause if I am wrong I would get hammered, so yes I know what you are feeling. The market gives you the clues sometimes, and sometimes you just have to go with your gut feeling of what is happening. You would not be the first or last to get hammered if you were wrong. I get ribbed for my “trader” status. But its often cause I’m shifting from negative status to positive status. There are times a core position should be taken at bottom and held though. then add higher up for a trading position. DBV has drill results that merit value, but this situation won’t be realized for a while. We are all here to make money.
PHM and CXV are having a good day, both were oversold since May.
Paul – PE should do very well and that’s why I own it. But I highly doubt PE moves up the same percentage game as EQT coming up here the next couple weeks. IMO
Comment by dave — August 31, 2015 @ 8:49 am
I agree volume is the first indicator but on the flip side if D4 heard rumors that things are not going good then there would be more volume to the down side as well.
Comment by Sam — August 31, 2015 @ 8:50 am
Sam – You make a good point on DBV, or is it that the selling is just exhausted at this point. Your post has merit though. But I think it is stagnant until that news release. I feel for D4 with his stake in it, but ya know in time it will change and we will see that news release. Hang in there D4.
Comment by dave — August 31, 2015 @ 9:02 am
EQT – its after lunch gents. 132k just came across and .13 now bid and building. Sumtin up.
Comment by dave — August 31, 2015 @ 9:10 am
wow, now .13 ask again. They really toying with this thing.
Comment by dave — August 31, 2015 @ 9:12 am
No disrespect towards Jon but he has stated things about DBV happening “soon” many times and here we are still waiting……we are still waiting for the bombshells to go off and national headlines but still nothing….I sure hope he is right but based on where the information came from I believe we are going to have wait longer…..there will be light at the end of the tunnel but unfortunately its not now.
Comment by D4 — August 31, 2015 @ 9:13 am
There was a clear signal from Garibaldi, Pat, a couple of weeks ago, that that has been a “turn” in events in the district, and I don’t believe they were speaking just on behalf of Garibaldi…their crews are now on the ground and that’s going to lead to drilling…in the case of DBV, while undoubtedly there have been encouraging developments (just going on what Regoci publicly stated) which I’m certain we’ll be updated on soon, DBV has been dealing with the specific actions of the blockade that occurred in July…that’s perhaps not so much a DBV problem as it is a Chad Day problem…think about that…a little more patience and I’m sure a lot of light will be shed on all of this, and things will move forward…that’s my take…
Comment by Jon - BMR — August 31, 2015 @ 9:26 am
I am not too worried about my position in Dbv, I think we will eventually get positive news from farshad that should send both Dbv and Ggi soaring up
Comment by Sam — August 31, 2015 @ 9:37 am
If you watch the constant bid-ask action on EQT every few minutes, you can tell this is typical action just prior to PP closing. Fun to watch.
Comment by dave — August 31, 2015 @ 9:45 am
I agree that all will end well and my retirement fund AKA DBV retirement fund will pay off…….patience is required. The issue at hand is very complex and one that Farshad requires assistance to overcome imo. Its not something that will get solved very quickly as “negotiations” were said to be not fruitful so there aren’t too many other options left to get things moving again.
Yes, GGI and DBV are in 2 different situations. I just hope that that Chris Day gets served what he deserves so that GGI doesn’t get to meet him and his old folks at the their site when a discovery hole is found!
Comment by D4 — August 31, 2015 @ 10:05 am
Dave – Once the PP is closed EQT will be let loose….
Comment by D4 — August 31, 2015 @ 10:07 am
Dave excuse my ignorance but why would they want to keep the price down before the closing of the pp?
Thanks
Comment by Jas — August 31, 2015 @ 10:10 am
D4 – for sure.
Comment by dave — August 31, 2015 @ 10:14 am
Jas- the PP is at .095 and those in it have a vested intest in seeing it offered at the .095. If the price was now .20 it could cause issues to close it at the prescribed price of .095.
Usually what happens is one of the large brokerages in the PP will sell short then cover with the PP shares and then ride the warrants for free.
Comment by d4 — August 31, 2015 @ 10:52 am
Somethink is going on with GGI, on sure what it is, think are looking good to say the least!
Comment by Martin — August 31, 2015 @ 11:09 am
interesting end of day ahead!
Comment by Martin — August 31, 2015 @ 11:18 am