With the price of gold denominated in U.S. Dollar close to multi-year lows, it would appear that gold bulls are probably quite discouraged at this point. There is a possibility that gold will break through its November lows, to test the 1050 U.S. Dollar price level. That would still not negate the secular uptrend, but it would not be fun for gold bulls.
Logically, the gold and silver mining space is being sold off as well. The miners have been beaten down along with the price of bullion. The first chart shows how the precious metals mining index GDX has come down from the 45 level in the first months of 2013 to a fresh low of 16.50 in November 2014.
In the same time period, gold has come down from the 1650 U.S. Dollar price level to the recent lows of 1135.
One would conclude that gold miners have been the worst investment in the last 3 years. We would caution readers not to come to this type of conclusion, even if that conclusion seems so obvious and intuitive. The point is that most of the miners have been in a very bad shape, but not all of them. Being invested in a mining ETF like GDX would have been very painful. But there have been several miners with an excellent performance, even in this aggressive bear market.
The next chart makes that point. As Rick Rule has been saying for over a year, we are truly in a “bifurcated market” in which a small number of miners are behaving in a fantastic way, while the largest part of the miners are moving to their intrinsic value which is zero.
The third chart shows the performance of 5 gold and silver miners over the last two years. Compare that with the GDX and bullion price on the above two charts. Do you see what a bifurcated market is?
Now is the time to accumulate the very best miners. It could take some time to make extraordinary returns, but the ones that survive and thrive in this type of market will guarantee fabulous returns at a later stage.