The Second Leg of the Junior Gold Bull Has Begun
As the title suggests, I believe that the second leg of the junior gold bull is now underway. Following a two-and-a-half-month breather, the Venture Exchange is ready for lift off.
While we have not yet witnessed an explosive day in the junior sector – a move that would clearly signal the path ahead – subtleties are at play.
Most notably, Tuesday was not an up day for gold; it was not an up day for majors (GDX) or mid-tiers (GDXJ) either. It was, however, a strong day for junior gold stocks. Select juniors posted significant gains. Such decoupling events are uncommon, but reminiscent of past moves.
Wednesday was another strong day for the juniors. Select stocks in the Palisades portfolio saw gains of 5%, some 10%.
The last two days have also seen an increase in financing activity. Following Canadian Thanksgiving, brokers and investors are eagerly placing capital.
If I am right, we will see a defining move in the coming days – gold, along with majors and mid-tiers will likely have a positive move. Importantly though, juniors will witness a sector move. Instead of select stocks posting strong gains, entire Stockwatch portfolios will be painted green. The proverbial starting pistol will fire, and the race will be on.
Looking back, the first leg of the bull market broadly aided most junior equities. Select companies really excelled. But it did leave behind a band of stragglers.
I expect that the second leg of this bull market will mark a shift – the metaphorical tide will rush in and all boats will rise. The ability to finance companies at 52-week lows will slip into the rear-view, becoming a figment of nostalgia – a distant memory of the good ole days!
As I have written about before, the first several months of a bull market are where the easiest and least risky gains are made. This second leg will be investors’ last go at easy money.
Of course, there will be many legs of this bull market. Each move up will attract more investors to the table until the trade finally becomes overcrowded.
For now, junior gold stocks remain an obscure class of stocks and the bull market has a way to go.
Until next week,
Founder & Executive Chairman
Palisades Goldcorp Ltd.