If you know one person holding a gold-related stock on the TSX Venture, they are likely up a lot of money this summer…
The TSX Venture refuses to back down in the face of soaring valuations and a declining gold price. The exchange closed at its highest level in over a year Monday as it continues to make new 52-week highs daily. What makes the current rally most impressive is that volume on the exchange has more than tripled from the lows of January, and this rally has continued into the dead of summer.
TSX Venture rally continues
The TSX Venture rally continues as the exchange has only declined 3 times since July 21st. And those declines were marginal, falling 0.47% on the 25th of July, 0.03% on August 3rd and 0.09% on August 5th. Even on days where the exchange should decline (August 5th saw gold crushed by over $20 an ounce) the exchange trades flat. It jumped almost 9 points or 1.1% today, on a day gold traded sideways, eventually ending the session down.
TSX Venture – 3 Month Chart
TSX Venture exchange is being revalued
With higher, not lower, commodity prices expected over the coming quarters speculators are grabbing what they can in depressed TSX Venture issuers that have endured the worst bear market in the history of the exchange. An example of this is the VanEck Vectors Junior Gold Miners (GDXJ) ETF, which rallied 1.66% Monday to $50.23 on big volume of 11.35 million traded, despite gold declining on the day.
Gold bull market intact
While some pundits warn of a risk to the gold bull market, their evidence is lacking. Gold only fell on Friday due to the strong jobs numbers (255,000 payroll increases in July).
I’m not sure there is anyone (impartial to the facts) who believes the U.S. economy is strengthening as GDP for the last few quarters was recently revised down significantly. In fact, the U.S. has averaged less than 1% over the past 3 quarters. Expect the frothy headlines of jobs reports to fade as more troubling headlines take center stage. This will benefit gold as it re-establishes itself as the safe haven currency and the reality the Fed is in no position to raise rates comes to pass.
Let’s be clear about one thing: the gold bull market is intact. I sounded the alarm as early as March 4th, in an article titled 3 Reasons Gold Bull is Back.
The three reasons which led me to believe gold had re-entered a bull market were as follows:
- Technical indicators have turned bullish
- ETF inflows are soaring
- Negative interest rates have left investors with limited options
Click here to read my in-depth analysis on the above three factors.
These state of these three factors continue to add to my belief that gold has entered a secular bull market and will eventually be heading to new all-time highs. With Britain dropping rates to just 0.25% last week and negative rates becoming the norm in many countries, this fad is not likely to end anytime soon. The SPDR Gold Trust (GLD) saw its largest one-day inflow of money since Black Monday on July 6th following Brexit. Investors will continue to diversify into gold as central banks continue to employ the same failed tactics in a bid to generate growth.
With September just three weeks away, U.S. markets at all-time highs and gold firmly in an uptrend, TSX Venture stocks may be just warming up.
This article represents solely the opinions of Alexander Smith. Alexander Smith is not an investment advisor and any reference to specific securities in the list referred to in the article does not constitute a recommendation thereof. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.