Gold Bugs, Read If You Dare

A popular gold miner is flashing the red light... [TradeSmith Daily logo] [TradeSmith Daily logo] October 24, 2024 Gold Bugs, Read If You Dare By LUCAS DOWNEY, CONTRIBUTING EDITOR, TradeSmith Daily The gold rush is here... Literally. Gold prices have risen an incredible 38.8% the past year. This has caused the shiny metal to take top news slots all over financial media. One buzzworthy article I’m sure you’ve read mentioned how club retailer Costco (COST) can’t keep 1-ounce gold bars in stock. Investors and hoarders are evidently scooping up gold at a breakneck pace. This commodity landgrab has also sent gold stocks rallying; some are venturing into extreme overbought territory. That’s where today’s signal study comes into play. First, we’ll take a glance at the stunning run for gold in 2024. Then we’ll take stock of Franco-Nevada (FNV), a gold-mining company that is flashing the red light. Over the short run, if you’re on the sidelines looking to cash in on the gold-stock wave, history says you may want to sit tight for a bit. And if you’re already up big on this trade, consider paring back a little. Let’s dig in. Gold’s Three-Month Run Leaves the S&P 500 in the Dust Commodities have been quiet for most of the year. That is, until recently. Precious metals like gold and silver have made staggering leaps. You can see this clearly with the SPDR Gold Shares ETF (GLD) and the iShares Silver Trust ETF (SLV) up 14.4% and 19.3%, respectively, in the past three months. And this has caused a 17.8% surge in the VanEck Gold Miners ETF (GDX), which includes a basket of gold mining equities. All three have massively beaten the SPDR S&P 500 ETF (SPY), which is up 5.3% in those same three months: When commodity prices rally, precious-metal miners benefit in a number of ways. Higher metal prices can lead to higher margins and revenues. Additionally, this can lead to increased production. As gold and silver make highs, the incentives to mine more and more only accelerate. Thus, gold-mining equities rise in value as the expected profit growth booms. Sounds easy, right?! Just be early on the trend. Jump in late, and the odds of profit are stacked against you. Sometimes excitement like this leads to an overbought signal...one that history suggests is a rip you don’t want to buy. That certainly applies to one well-known gold stock participating in this rally... SPONSORED AD [URGENT: Presidential Election Summit Invitation]( [image]( The day after the presidential election, a quiet D.C. meeting will take place that could plunge markets into extreme volatility… According to an industry insider, [it will become painfully clear to Americans the day after election day…]( [Register Now for Our Urgent “Day After” Election Summit ]( Gold Miner Franco-Nevada Reaches Rare Overbought Signal Founded in 1983, FNV is a leading gold-focused royalty streamer. It’s one of the easiest plays for an investor to get exposure to the gold-mining industry. And it’s not a tiny operation. In 2025, Wall Street expects Franco-Nevada to generate $1.3 billion in revenues and $755 million in net income. This company is no slouch on the fundamental front... nor on the technical front, either. In three months, shares of FNV have risen nearly 9%: What makes this rally unique is the steep rally off to the right above. That’s 10 consecutive days of higher prices. In fact, it’s the second time it’s reached this extreme buy zone, with the last one occurring back in April 2018. And the outcome wasn’t good: - One week later, the stock had fallen 2.9%. - One month later, the stock was 2.2% lower. - Two months later, the trend remained negative, with shares down 3.1%. Now, I’m not trying to pour cold water in your gold pan. Just recognize that we are in rare territory with the latest rally. The sample size here is small, but more importantly it’s a hidden insight spotlighting how big of a move we’re witnessing. Throw in the fact that [Jason Bodner’s Quantum Score]( doesn’t validate owning this company today, with a mid-range score of 58.6. The buy zone would be in the 70-85 range. And that goes for both components: the fundamental score and the technical score. They’re a one-two punch to the overall Quantum Score, indicating that we should hit the sidelines near-term: The precious-metals rally should reach fatigue soon and would likely spell lower levels for Franco-Nevada. If you’re looking to get in on the gold-mining rally... the Quantum Score is signaling “wait for a better entry point.” History suggests it’ll be worth the wait. Even better, let the Quantum Score help you determine which stocks are primed for upside. By joining [Jason Bodner’s Quantum Edge Pro]( service, you’ll have the ability to instantly score and rank any stock right on your TradeSmith Finance dashboard...and find market-beating stocks flying under the radar. Now that just might be the golden ticket your portfolio needs! Regards, Lucas Downey Contributing Editor, TradeSmith Daily © 2024 TradeSmith, LLC. All Rights Reserved. 1125 N. Charles Street, Baltimore, MD 21201 To unsubscribe or change your email preferences, please [click here](. 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