Equinox Gold – New High – What’s Next?

by JDH on February 15, 2020

Back on January 11, 2020 I published Equinox Gold Corp – A Deep Dive, where I explained why I thought EQX.TO – Equinox Gold Corp., my largest gold holding, would go much higher.

This three year chart looks good.  Very good, actually.

Equinox Gold traded at $9.62 on January 3, and closed on February 14 at $11.87, so that’s a nice 23% pop so far on the year.  Not bad.

My reasons for expecting a good performance from EQX:

First, favorable gold market.  Money printing, uncertainty in the world, etc.  Gold is up about 4.4% on the year, so that assumption has so far been proven correct.

Second, the company is doing well.  The merger with Leagold will increase production, and that’s good.

Finally, and most importantly, increasing size leads to inclusion in indexes.  We live in the world of ETFs.  The passive investor is king.  So, if you want to invest in gold, you buy a gold ETF.

As I said last month:

…post merger Equinox is easily large enough to be included in the MVIS Global Junior Miners Index, which is the basis for GDXJ – VanEck Vectors Junior Gold Miners ETF, which trades on the big board.

As of today EQX is not part of GDXJ, but I expect it to be added over the next month or two.  When that happens a new wave of buying is required to include it in the index, and up goes the share price.

Of course everyone knows this.  It’s not like I’ve got insider knowledge.  So, I assume the smart fund manager are already buying, so they are positioned when the inclusion happens.

As I also said last month:

There is also the GDX – VanEck Vectors Gold Miners ETF, which tracks the performance of the NYSE Arca Gold Miners Index, which tracks gold mining shares, including the big companies, not just the juniors.

It’s not just one fund that will be buying EQX; there are many.

Equinox should easily be a $15 stock by the summer, and perhaps $20 by the end of the year, so I’m holding.

So far, so good.

More next week.