Last week gold stocks crashed to their lowest levels ever. The HUI “gold bugs” index closed the week down 7.1% at 3.53 grams, a new all-time low, and on Monday 20-July fell another 9.8% to close at 3.18 grams. The Barron’s Gold Mining Index has made several new lows in 2015, but it also closed the week at a new all-time low of 11.59 grams, 21% below its long-standing 14.74 gram low set back in April of 1942.
Meanwhile, the S&P 500 closed the week UP 4.8%, the Japanese Nikkei 225 rose 4.5%, and even the EU STOXX gained 3.5%. Bonds did as well as mainstream stocks, with the long term treasury fund TLT rising 4.7% for the week. But keep in mind that although the S&P 500 has tripled since its low of 2011, it is still only 1/3 of its value at the top in 2000 – it would need to triple in value again to make a new all-time high.
The USD is going parabolic, and mixing with the troubles in Europe and China, hypergolic. This is powering a leveraged RISK-ON trade in stocks and bonds, and creating blood in the streets of gold mining. Are gold miners going out of business? For many of the weaker companies, the answer is probably going to be YES. But for strong companies with bulletproof balance sheets and lots of gold in the ground, the answer is certainly NO! I think we are approaching a once in a lifetime opportunity for profits in the gold mining sector. Let’s see how this week plays out.