I wonder what roadrunner thinks about junior miners price suppression?

jmski52

From Sinclair's website, Dan Norcini highlights the shorting of Junior mining stocks via GDX vs. GDXJ spreads...

roadrunner

I think it's bad for junior mining companies...but good for those that want to keep buying them.

The below article gives some credit to the Canadian dollar's strength over the past several months as well as the rising price of crude which
accounts for around 25% of mining costs. Another factor is the overall cost of industrial equipment and supplies, labor, taxes, royalties, etc.
Basically there is essentiall no portion of the miners cost that is going down. Toss in political and permitting risks, currency risks, derivative's risk,
falling ore grades to name and you have a recipe for keeping a lid on profits. Then factor in one off events like mine flooding, heap leach pad covers tearing,
mine cave-ins, the local utility turning off the power, riots and wars, and labor disputes and strikes. There's a lot that affects the share price and each of
these has affected some major miners over the past year.

Why gold stocks have been lagging.

Stewart Thomson had an article today that suggested that there hasn't been enough of J6P's money available to chase the miners. And if Joe is interested in gold
he's probably either buying some physical bullion or investing in a bullion ETF.

Thomson on weak gold stocks

In the end, there are more reasons that you can shake a stick at. And except for deliberate naked shorting, none of them would appear to be manipulative. The
hedge funds with their long gold and short miner trade would not be manipulative unless they were naked shorting the miners. It's just a trade. And as Thomson suggests,
once the big banks stop loaning to the funds, the miners could rapidly accelerate in price.


roadrunner

jmski52

I was thinking that a gradual entry into a position in GDXJ might turn out well, but that it almost certainly would have to be gradual.

Course, I've been thinking that for some time now.

cohodk

Money flows to what is moving. Silver has been moving, not the miners. If the miners has started to move higher 8 months ago, then they would ahve tripled by now also. There is no supression, but rather lack of buying.


Ediited to add that I just read that Roadrunner had posted a link saying virtually the same thing.

Justacommeman

This was the very reason I asked RR awhile back what he liked better GDX vs GDXJ. His reponse was very logical and it was what I was hoping he would say actually. MJ

roadrunner

<< <i>I was thinking that a gradual entry into a position in GDXJ might turn out well, but that it almost certainly would have to be gradual.
Course, I've been thinking that for some time now. >>



I don't think we get another large (>20%) correction beginning in GDXJ until the late May - early June time frame. Between this week and next
week will be all the time available to consolidate before trying to play catch up with gold. I'd lean towards some further weakness later this week
or next week (gold options expiration). I'd base that on gdxj having a pair of gaps open back in mid-March following Japan's nuclear
accident. GDXJ is efficient at clearing gaps and rarely leaves them open for more than 2-3 weeks. Usually they are cleared out in the following
opposite move (ie days). Seems like there should be a final move down to create a standard zig zag correction in gdxj....or a touch of that lower 20 day BB.
And I usually see the green (up) Aroon line hit 0 and W%R cross -80 before a correction ends. Though that's certainly not set in stone. Just the norm. The
red line crossing over the green Aroon line indicates things are into the 2nd half of the short term correction. But I don't rule out the possibility that GDXJ is
ready to jump upwards, esp. with gold hovering right at $1500.

Today's volume wasn't all that impressive. With no heavy POMO days the rest of this week the stock market is flying solo. And GDXJ and friends tend to
move with the main markets. At least until this area gets more interest from J6P.

GDXJ chart

Over the next 1-3 yrs I'd look for for bullion silver to perform as well or better than GDXJ. So if you have silver, you have as much mojo as GDXJ. Now that
GDXJ is 1-1/2 yrs old, the index is not so littered with smaller miners any more. It's really an intermediate index now. GLDX has come along to represent
small explorers and producers, but it's daily volume is still pitiful compared to GDXJ.

roadrunner