More matter with less art

The market is turning, allow it some time

I’ve been thinking a lot about B2Gold (BTG) (BTO.to) recently and this post concerns that stock in passing, but rather than try and prognosticate on the future of The Clive’s Rhino it concerns the last time I bought BTO stock hand over fist, because I believe it offers a window on what’s happening in the market today.
Students of the gold market know that January 2016 marked a clear turn point for gold, the point where it snapped out of a years-long bear market and popped quickly higher, starting a bull run in the precious metals mining sector. However, I remember buying BTO at its lows and plenty AFTER gold started its big run and was moving swiftly higher on gathering momentum. Here’s that chart:

The third week in January, with gold having broken out and clicking higher, I was staggered to see BTG making new low after new low (turns out a large fund was puking, big mistake on their part). I went as close to zero cash in my accounts as possible (I do not use margin, period), bought all I could around 75c average (the bottom was U$0.60c intraday, remember it well) and then as the trade was a near-term set-up, sold them back a couple of months later for a nice win which would have been a lot nicer if I’d held on to them for another quarter. So there you go, anatomy of some pissant retail’s winning trade, big deal. However, what it does allow me to recall is that when gold turns, don’t expect the market to smoothly turn with it just because gold gets popular in crises, that’s also when people are putting out fires in their portfolios, or on previous orders from upstairs to sell a position into the market when they shouldn’t be doing that any more, or all sorts of fun. Note I added GDX and GDXJ to that above chart and from gold’s decisive turn point, arguably January 20th 2016*, as well as it needing a week before BTG had bottomed the indices needed two weeks before they were back positive for the year. I invite you to look at a longer-dated chart of what happened to the market in 2q16 at you own leisure (one hint would be “whoosh”).
With the advent of The US Federal Reserve cutting rates and certain to cut again soon, gold this week marked an obvious turn point because gold moves up in value when the USA deliberately weakens its own currency. However, the above chart shows why you the investor, now long to your armpits in precious metals stocks, shouldn’t get frustrated in this brief period while the broad markets get used to the new normal (includes Covid-19). Once they do and the dust settles, the big players will also see the inherent logic in owning gold this year and it will go higher. Once that happens, the market will seek leverage so now that you are positioned nicely and the “be right” is covered, time to do the “sit tight” thing as the value of quality PM companies is discovered by others.

 Disclosure: No current position in B2Gold.

*Gold bottomed about a week before, then rebounded above U$1,100/oz in a sharp move on Jan 20th

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