Gold’s Bull Market Just Proved Us Right

Dear Reader,

A few weeks ago, I showed you one of my favorite contrarian indicators.

At the time, gold miners had been beaten up. Investors were frustrated. Momentum had disappeared…

And one measure of the sector’s internal strength — the Gold Miners Bullish Percent Index, or BPI — was flashing one of the most extreme readings we’d seen in years.

In June, the index actually touched zero.

That meant virtually none of the gold mining stocks tracked by the indicator were showing bullish point-and-figure signals. And by mid-July, the BPI was still languishing below 20.

In other words, practically nobody wanted these stocks…

And that’s exactly why I told you to pay attention.

Because markets have a funny habit of creating some of their best opportunities right when almost everyone has stopped looking.

And if you followed that advice, congratulations, because the opportunity didn’t stay hidden for long…

From Hated to Red Hot

When we discussed the BPI, the argument wasn’t that gold miners suddenly had no risks.

It was that the risk/reward equation had become unusually attractive…

Gold itself was still trading at historically high prices. And miners were still selling ounces for dramatically more than it cost many of them to produce those ounces.

Yet mining shares had been dumped hard enough to produce the kind of breadth readings normally associated with capitulation.

Something had to give and it did…

Gold finished July around the $4,000-per-ounce neighborhood after a sharp correction. But today, it’s trading around $4,500.

That’s roughly a 10%–12% jump in a matter of weeks.

But remember one of the other things we talked about…

When gold moves, miners can move farther.

And that’s because mining companies essentially provide operating leverage to the gold price.

Think about it like this…

Imagine a miner produces an ounce of gold for $2,000 and sells it for $4,000.

That leaves a $2,000 margin.

Now imagine gold rises 10%, to $4,400 while production costs remain roughly the same.

Revenue only increased 10%.

But that hypothetical margin jumped from $2,000 to $2,400 — a 20% increase.

That leverage is one reason mining stocks can absolutely scream when gold starts moving.

And that’s exactly what just happened…

Gold up 10%, Miners up 25%

At the end of July, the VanEck Gold Miners ETF (NYSE: GDX) traded around $74. And it’s now around $92.

That’s a gain of roughly 25% in less than a month.

But the junior miners did even better…

The VanEck Junior Gold Miners ETF (NYSE: GDXJ) finished July around $95. And it recently traded above $121.

That works out to roughly 28%.

And individual miners delivered similarly impressive moves…

AngloGold Ashanti (NYSE: AU), for example, finished July around $79 and recently traded around $101.

That’s approximately 27% in just a few weeks.

Even this past Wednesday offered a perfect demonstration of the leverage we’re talking about…

Gold futures jumped about 3%. GDX surged more than 9%. Newmont jumped about 8.5% in a single session.

That’s why we watch indicators like the BPI…

They don’t tell us exactly which day a market will bottom. Nothing does.

But what they can tell us is when the crowd has moved so overwhelmingly in one direction that the potential reward starts dwarfing the remaining risk.

A few weeks ago, practically everyone had piled onto the bearish side of the gold-mining boat.

We pointed to the other side… Then the boat flipped.

This Is What Bull Markets Do

But there’s an even more important lesson here…

I don’t think this rally is some isolated bounce in an otherwise dead asset.

In fact, I’m convinced it’s another chapter in a much larger gold bull market.

And corrections like the one we just experienced are part of that process.

Bull markets don’t move straight up…

They rally, get overextended, scare people out, consolidate, convince everyone the move is finished, and then resume climbing.

Gold has done that repeatedly because the fundamental forces pushing it higher haven’t disappeared…

Governments continue spending more than they collect and sovereign debt continues accumulating.

Central banks continue looking for alternatives to dollar-denominated reserves.

In fact, a recent industry report showed 45% of central banks surveyed expect to increase their gold reserves during the next year.

That’s the highest share recorded in that survey.

Geopolitical risks also remain elevated to say the very least…

And investors continue facing the long-term erosion of purchasing power that comes from monetary inflation.

But now we’re seeing another potential catalyst emerge…

The Treasury recently announced an expansion of its long-term bond-buyback program.

Markets immediately pushed Treasury yields lower, the dollar weakened, and gold exploded higher.

Gold surged more than 4% at one point and GDX responded with a roughly 9% jump.

That reaction tells you something…

Investors remain extremely sensitive to anything that looks like easier financial conditions, downward pressure on yields, currency debasement, or expanding government intervention in debt markets.

And those issues aren’t going away.

Which is why I continue to believe investors should view violent pullbacks in gold and quality gold-related assets as potential opportunities rather than automatically assuming the bull market is finished.

The BPI just gave us a textbook example.

But There’s Another Way to Play Gold

There’s one problem with discovering a successful trade after it has already jumped 25%, though…

The easy money has already been made.

Now, that doesn’t mean miners can’t keep climbing. I think many will.

But it does mean we should constantly be searching for the next asymmetric opportunity.

And right now one of the most interesting gold-related assets I’m watching isn’t a mining stock at all.

It’s NatGold…

You see, NatGold has developed a completely different model for monetizing gold.

Instead of spending hundreds of millions of dollars building mines, digging enormous pits, crushing mountains of rock, processing ore, dealing with tailings, and waiting years for production…

NatGold’s model is designed to tokenize verified in-ground gold resources.

And its NATG token gives investors another way to gain exposure to gold-linked value.

International investors can trade NATG through MEXC, while NatGold has also established channels for eligible U.S. purchasers through High Ridge Trust and institutional investors through 677 Financial Group.

But what’s really caught my attention is what happened after trading opened…

NATG traded as low as about $2,217 on July 31 before climbing above $2,500 in early August.

That’s a move of roughly 14% from low to high in about a week (a week when gold only moved about 9%).

Because gold gives NatGold its economic foundation…

But NatGold potentially gives investors something plain gold doesn’t…

Exposure to an entirely new system for unlocking the value of gold that’s already been discovered but remains underground.

And just as gold miners can outperform gold because of their operating leverage, an emerging asset built around a new way of monetizing gold could potentially offer another layer of upside as the concept catches on.

And that makes this extremely interesting…

We just watched an extreme BPI reading turn into 20%-plus gains for gold miners in a matter of weeks.

That trade reminded us why it pays to look where other investors aren’t looking.

And I think NatGold deserves exactly the same kind of attention.

Because this gold bull market isn’t over…

And the biggest gains may once again come from looking beyond the obvious ways to play it.

Why Are Gold’s Biggest Miners in Panic Mode? 

For the first time in modern mining history, the gold industry has now gone two straight years without a single major new discovery. Not one. 

The world’s largest gold miners sit with this fact every day. And they’re doing the only thing they can…

They’re buying. Aggressively. At premiums most investors find shocking.  

Agnico Eagle recently paid a 67% premium for a junior gold company. That was the third major acquisition in five months. $14 billion in deals altogether.

And the pace is only accelerating. Because here’s the math the majors can’t escape…

The biggest gold mining companies on Earth are losing reserves faster than they can replace them.

That leaves one path forward: Acquire junior companies that already control the largest undeveloped gold deposits left on the planet.  

There are only 10 of them. Click here to see all 10 names.