With the gold price breaking higher on Thursday following a jump in initial jobless claims, gold mining stocks shined just a bit brighter. The Direxion Gold Miners ETF, Thursday's IBD Stock Of The Day, flashed a buying opportunity on a continued bounce above its 21-day exponential moving average.
The NUGT ETF, like GDX, the VanEck Gold Miners ETF, aims to track the NYSE Arca Gold Miners Index. The main difference is that NUGT is a leveraged version, with both upside and downside moves equal to 200% of the NYSE index. GDX follows the price and yield performance of the index on a one-to-one basis.
Newmont, Agnico Eagle Mines, Barrick Gold, Wheaton Precious Metals and Franco-Nevada are the largest positions, accounting for about 40% of the ETF.
Historically, gold mining stocks have tended to rise more than the gold price on the way up, and fall more on the way down. That was because changes in the gold price relative to a miner's cost of production had an outsized impact on profitability.
Strange Year For Gold Prices
Gold mining stocks also may still be making up for a lousy first two months of 2024, when they fell 15%, even as gold prices began to move higher. SPDR Gold Shares, the GLD gold price ETF, dipped just 1% during that period. Gold mining stocks finally began to show strength as the gold price broke to an all-time high in early March.
This year's rise in the gold price has been unusual in that it accompanied a stronger dollar and a fizzling of Federal Reserve rate-cut expectations. Generally, gold has done well when real interest rates are low or negative, which means the opportunity cost of holding gold is low.
However, geopolitical uncertainty and demand for gold in China, both from the central bank and general public, have overcome historic patterns.
Thursday's rise in the gold price was more traditional, with a 22,000 jump in initial jobless claims to 231,000 rekindling hopes for multiple rate cuts this year.
NUGT, Gold Mining Stocks, GLD
NUGT climbed 4.7% to 41.3o through midday in Thursday's stock market action, while GDX rose 2.6% to 35.03.
Both NUGT and GDX flashed early entries, taking out recent highs from April 29.
GDX is also closing in on a 35.74 buy point from a 52-week cup-with-handle base. NUGT has a potential buy point at 43.58, in what could be charted as either a handle or a lingering three-weeks-tight pattern.
On Thursday, SwingTrader opened positions in both GDX and GLD, with the latter breaking a trendline as it cleared its 21-day exponential average.
The day's action carried Newmont higher within a buy zone.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
