So far in 2016, gold stocks have soared – both junior and larger mining companies. Here, we believe, are several reasons why:
- There have been positive changes in both sentiment and the investment demand for gold.
- Companies have successfully slashed costs, cut debt, gained efficiencies, and generated cash.
- There has been mean reversion in a sector that had been oversold during the worst bear market in history.
- The short selling pressure that had been weighing on gold and gold stocks since they crashed in 2013 has been eliminated.
- There is limited liquidity in a relatively small sector with a global market cap of around $250 billion.
We expect that there will probably be a brief correction at some point this year, potentially providing an entry point for those investors who, so far, have missed this year's rally.
MVIS Global Junior Gold Miners Index – Performance YTD
Source: MV Index Solutions
Get the latest news & insights from MarketVector
Get the newsletterRelated:
