..four possible factors:
1) My first is that China (central bank and its people) are buying physical Gold, not paper gold and certainly not Western gold stocks. And China is the main driver for Gold's recent rise
2) Company specific risks dogging some gold companies including production issues (due to floods, climate change, mine suspension), higher production costs (less of an issue now), and some even hedging to a lower price
3) Company overpay for acquisitions/mergers that dilute shareholders with no immediate cashflow benefits- large goodwill eventually need to be written down
4) Gold stock trauma- the traumatic experience of gold stock hodlers from 2020 still haunting them, despite Gold making all time high, these largely gold junior stocks are still in basement prices
...which has now led many pundits to suggest that this disconnect cannot continue indefinitely, and that common sense suggest that it would be a matter of time before gold stocks finally making a strong move.
...I think that resonates with sensible thinking, but I also kept thinking
a) why would the market be so inefficient not to see this disconnect, if it is actually that great an arbitrage. And why after so many have pounded on the table, it has yet to move in a more profound way.
Other than the four reasons I offered above, I think that US and EU market participants are not as eager to participate in gold stocks than they are on tech or even energy. As I mentioned before, Gold is associated with Mr Bear, so the bulls tend to avoid them, it is like asking the Democrats to watch Fox News.
The next reason is that market participants seeking safe haven have gone into BTC, possibly erroneously because BTC correlates more with tech and goes down during adversity rather than going up. But that is a sizeable chunk of funds that could have gone into Gold and gold stocks' way.
Gold would probably be $3k today if it wasn't for BTC and BTC ETFs sucking in the $$.
Until gold stocks start to show some leadership in following Gold, we can't assume too much other than that the disconnect should not last too long.
Sometimes we see an opportunity when actually there isn't.
If you've been to Myanmar, you would notice that people there do not wear shoes like we do. They wear flip-flops. So if you're a shoe distributor, you could easily conclude that Myanmar is a world of opportunity (for shoes). The reality however is that culturally they are predisposed to flip flops /tongs due to religion and Western commercialism is largely not allowed to proliferate there.
$GDXJ Gold Stocks ETF. From Elliott Wave perspective we are currently in a bullish {Wave 3 of 3} advance. Notice how GDXJ exploded out of the {Falling Wedge} in March 2024. Target for {Wave 3} is 50 area. It's certainly taken longer than expect for #gold to explode but here we go
