Hard-hit mining stocks rallied last week along with precious metals exchange traded funds after the sector suffered through a bleak 2011.
Market Vectors Gold Miners ETF (NYSEArca: GDX) and Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) are both higher over the past five trading days, gaining 5.3% and 8.3%, respectively. Global X Silver Miners ETF (NYSEArca: SIL) also added 6.1%.
Miner stocks may finally be ready to outperform precious metals after badly lagging gold prices in recent years.
“The U.S. dollar is reaching key resistance at 81, while gold, silver and the miners test support at oversold conditions indicative of a major rebound move,” Gold stock Trades’ Jeb Handwerger said in a Barron’s article. “We could be setting up for the biggest move in precious metals and miners during this 10-year bull market run.”
Last week, global manufacturing data showed improvements in December, with the U.S. revealing factory output at its fastest pace in six months, Australian manufacturing expanding for the first time in six months and Chinese and German data beating economists’ estimates, according to a Bloomberg article.
Handwerger also noted that silver, which has industrial applications, is well-positioned as manufacturing demand increases.
“Silver has a much bigger upside than gold at this point in the cycle,” Handwerger added.
Additionally, industrial metals producers and miners are also strengthening as base metals’ prices are rising on speculation that the stronger manufacturing numbers could portend an uptick in industrial metals demand.