A Generational Opportunity in Gold Miners

After being arguably overused decades for decades, the old Wall Street adage about blood in the streets being a buy signal still has practical application in today’s financial markets.

That could be what some eager gold bugs are hoping for. Following a brutal year for bullion in 2013 and an even worse year for gold miners, those bullish on the yellow metal and the companies that extract it from the earth may have something to hang their hats on.

Buying last year’s losers, including the Market Vectors Gold Miners ETF (NYSEArca: GDX), was extolled as a good idea by some in late 2013. The advice is paying off as the $6.9 billion GDX, the largest gold mining ETF by assets, is up 4.5% in just the past week. [Friend Fear With ETFs]

That could be just the beginning for an ETF that plunged 54% last year, a drop that was nearly twice as bad as the losses incurred by the major ETFs backed by holdings of physical gold. Technical analyst Chris Kimble of Kimble Charting Solutions says the current scenario for the miners “is a rare scenario.”

“It is interesting how much things have changed in just two calendar years for gold,” said Kimble in an interview with ETF Trends.

Kimble notes the momentum on the PHLX Gold/Silver Sector Index (^XAU) is more oversold than it has been at any time over the past 30 years.

“On a monthly basis, XAU and HUI, the NYSE Arca Gold Bugs Index (^HUI) are at 10-15 year support,” said Kimble. “From a risk/reward standpoint, you can only dream of this.”

Chart Courtesy: Kimble Charting Solutions