A Great Week for Gold

by JDH on February 22, 2020

That was awesome, eh?

Gold started the year at $1,517.  It touched $1,652 on Friday.  Not a bad start to the year.

The highly leverage ETF that tracks gold mining shares, NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, has had a rockier ride this year, but is finally back in new high territory.

In contrast to gold, NUGT started the year over $35, dropped to around $29, and finally this week got back above $38.

The two year chart I’ve produced here shows a price of $27.50 in April 2018,, so while NUGT is higher now, it has been a volatile ride.

What does this imply going forward?

The RSI is at 68, so while further increases are possible, and likely, a double in the next week is not likely.

I don’t think this is the top, because the MACD (at the bottom of the chart) is still in reasonable territory, but who knows.

I’ve watched NUGT and it’s volatility for years.  It’s a 3 times leveraged ETF, so it’s goal is to be volatile.  So I plan to thin my holdings somewhat over the coming weeks.  Sell orders around $45 seem reasonable to me.   A $50 level would be roughly a double since Christmas, and that’s not sustainable, so taking some profits off the table is prudent.

There is one stock where I am not taking profits, yet: EQX.TO – Equinox Gold Corp.

Equinox is my single largest holding, and since it bottomed around $4.50 around Christmas 2018 it’s had a volatile but upward trajectory.

The chart says “sell and take profits”.

$12.89 is a big increase so far this year.  The RSI is at 75, and MACD is looking very toppy.

So why am I taking profits in NUGT but holding EQX?

Because EQX is not done yet.

As I explained last week, Equinox has more room to run, because it has yet to be included in the various gold share indexes that will drive further investment demand.  I expect those inclusions to happen imminently, perhaps in March, certainly by June.  If your fund tracks the index, you have to buy the stocks that are in the index, and more demand leads to higher prices.

Of course everyone else already knows this.  This is not insider information.  No doubt some funds are already buying in anticipation of this inclusion, which may account for some of the recent rise.  My guess, however, is that most of the recent rise is directly related to the gold price, so there is no reason it can’t run some more.

My preliminary target is $15, but we’ll see where it’s at when it gets there.  Equinox gained around $1.50 this week, so it could be a $15 stock next week, but if it’s not in the indexes yet, I’m not selling.  (It may be $10 next week if gold crashes; so be it, the plan still holds; I wait).


A final stock to watch: PDM.V – Palladium One Mining Inc.  Palladium (the metal) is on a big run, up more than gold this year (and worth more per ounce than gold).  Drilling results look good, and they continue to drill, so more positive results are likely.  There are very few companies with an emphasis on palladium, so as the market realizes this, it should continue to rise.

Could this be a 40 cent stock by the end of the spring?


Could it drop to zero?

Perhaps, if the drill results are lousy, but that seems unlikely given what they have already found.

I’m a buyer on weakness, and I have no plans to sell, yet.

That’s the update.  A great week.  Let’s see how the end of the month of February treats us……..