One Market's Elevation is Another's Runway

Precious miners are pausing at their mid-July highs this morning, which is apparent when one views the daily charts for GDX and GDXJ. 

On the longer-term timeframes, such as the GDXJ (ETF for junior gold miners) weekly, below, we can see this $49 area stretches back over ten years as being a significant price area. The net result of all of this basing, however, is that the precious miners have the mother of all runways to potentially catapult higher in the coming months, quarters, even years. 

As an example of the enormous upside in this asset class, it is hard to exaggerate just how underinvested not only the average American is in gold, but also the investor class. For decades on end we have heard even the likes of Warren Buffett mock gold as being the ultimate pet rock. And with the recent advent of crypto, it only served to further marginalize the case for owning gold. True, Costco has had some success selling physical gold of late. But we are nowhere close to the precious metals/miners reaching critical mass in the investment world. 

Interestingly, there is much speculation about a looming 50 bps cut this Wednesday at the FOMC, as leaks during The Fed's blackout period look to have driven up expectations of a bigger cut than initially expected. Recall that gold flourished in the 1970s, again, during a time of stagflation when The Fed turned too dovish, too soon. 

While it is true that Powell and The Fed have some elevation to cut aggressively (they did raise 500 bps in a relatively short period of time, after all), the precious metals and mining "runway" may be the ultimate check on The Fed this time around to see if they truly are embarking on a major policy error when inflation comes roaring back or, at a minimum, fails to crater. 

Thus, I will be watching the group closely not only for market commentary on The Fed, but also for an actionable long entry above $49 on GDXJ to sustain a long-term breakout.