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D E C E M B E R / J A N U A R Y 2 0 2 0
At the Market
by John Newell
A
fter gold bottomed in the fall of
2018, it rallied about 33% into the
September 2019 highs, taking its
first a giant step forward since early 2016 and
broke the long-standing resistance of the US
$1,350/oz level. This was an event all but the
most ardent bulls were beginning to think
would never happen after multiple attempts
in the past seven years.
The S&P/TSX Gold Stock Index went up
about 90% in the same time frame, outper-
forming the physical metal by its traditional
3:1 leverage ratio. Meaning, historically ris-
ing gold prices have a multiplier effect on
gold shares, because miners have fixed costs
and high operating leverage; therefore, large
moves in gold prices have a big influence on
a miner's profitability.
However, it wasn't a smooth ride and, as
diehard precious metal bulls know, it never
is. Gold rallied nicely into the first few
months of 2019, gaining about 15% into
the major overhead resistance at US $1,350,
before correcting. The yellow metal's first
small step back was about 6% into the early
summer lows of 2019.
This corrective action or pause helped
gold shake out investors and dampen exces-
sive optimism and take on market fuel for
the next 15% advance that broke the long-
standing US $1,350 resistance. Gold rallied
strongly into the mid-US $1,500 level, cap-
ping off a major move of +30% move bottom
to top.
The gold shares, as a group, represented
by the S&P/TSX Global Gold Index, moved
approximately 30% in the same time frame,
before retreating back about 15% into the
2019 early summer lows and before resum-
ing the uptrend it had previously established
Gold and Precious Metal Indices
– one giant step forward, two small steps back
