The gold miners’ stocks are continuing to power higher in a strengthening upleg. As their gains mount, sector bullishness is gradually growing. Traders’ interest is rising, leading them to increasingly chase gold stocks’ robust upside momentum. As uplegs mature, this key technical-sentimental interplay feeds on itself accelerating gains. But overall gold-stock sentiment today remains neutral, arguing this upleg is young.

Successful trading demands buying low then selling high. But this simple concept is difficult to execute because of the emotions involved. Shorter-term speculators and longer-term investors endlessly struggle with greed and fear. They become greedy after prices surge dramatically, ending up buying high. Then they get scared after prices plunge sharply, spooking them into selling low. Thus the markets slaughter them.

Multiplying wealth in the markets requires fighting herd sentiment to do the opposite. Legendary investor Warren Buffett has a fantastic quote summarizing this core contrarian truth, which we’ve long used on the mastheads of our newsletters. “Be brave when others are afraid, and afraid when others are brave.” The key to buying low is doing it when other traders are fearful, and selling high when other traders are greedy.

Stock sectors like gold stocks perpetually meander in upleg-correction cycles, and that price action drives prevailing psychology. Popular greed dominates after major uplegs, and fear reigns following subsequent major corrections. Herd greed and fear oscillate like a giant pendulum synchronized to that cycle rhythm. Similar to a pendulum at its arc’s peaks, neither extreme lasts long before mean reverting the opposite direction.

This swinging greed-fear dynamic is readily apparent in gold stocks’ leading benchmark, the GDX VanEck Gold Miners ETF. As of midweek, GDX’s young upleg has powered 52.1% higher in 4.0 months! When it was stealthily born in late September, the sentiment pendulum was pegged in suffocating fear. With this sector largely left for dead, very few traders capitalized on that awesome contrarian buy-low opportunity.


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But we were among them, aggressively buying and recommending dirt-cheap gold stocks in our popular newsletters. The best times to buy low are after major selloffs when everyone else is scared, and GDX had just plummeted 46.5% in 5.3 months! That was in response to heavy gold-futures selling as the US dollar rocketed parabolic on the Fed’s extreme tightening. But all that was unsustainable, it had to mean revert.

GDX had been hammered to an exceedingly-oversold 2.5-year low, extreme levels last seen in the dark heart of March 2020’s pandemic-lockdown stock panic! The trading day before GDX hit its $21.87 nadir in late September 2022, I published an essay on that false gold-stock panic. With the sector-sentiment pendulum deep into its arc’s fear side, that was an ideal opportunity to fight herd sentiment as I advised then…

“Gold-futures speculators fled unleashing enormous selling as the US dollar soared parabolic on the Fed’s most-extreme hawkish pivot ever. That tainted gold psychology, leaving investors bearish enough to join in the selling. But all that has mostly been spent, with speculators’ gold-futures positioning and investors’ gold-ETF holdings at major multi-year lows. As all that reverses, gold will soar launching gold stocks way higher.”

That’s indeed exactly what happened since! As prices V-bounced out of those anomalous panic-grade lows and mean reverted higher in recent months, sector sentiment started swinging back towards bullish. This combined gold and GDX chart illustrates this powerful technical-sentimental dynamic that continues to unfold. Herd psychology is no longer fearful, but still just nearing the neutral bottom of its pendulum’s arc.

GDX’s big 52.1% gains over the past 4.0 months amplified the parallel underlying 19.9% gold upleg by 2.6x. Since gold-mining profits leverage underlying gold prices, the major gold miners of GDX tend to leverage material gold moves by 2x to 3x. So gold stocks’ strong gains so far in their young upleg are normal, nowhere near excessive. That’s a clue illuminating where that sentiment pendulum likely is in its arc.

Buying low then selling high demands gaming upleg-correction cycles, doing the opposite of whatever conventional wisdom is near extremes. That meant buying in late September when everyone else was selling or had already fled. This resulting mean-reversion gold-stock upleg isn’t likely to give up its ghost before herd sentiment swings back full-arc to universal greed. While we can’t measure that, we can infer it.

Obviously traders’ collective psychology is ethereal, it can’t be charted or plugged into spreadsheets. But like the invisible wind outside, herd sentiment can be deduced by observing its effects. There are a variety of indicators traders can watch that together help illuminate where that pendulum is in its greed-fear arc. Today they are all suggesting it is nearing the bottom, the neutral zone between those opposing extremes.

That gold-stock leverage to gold is a technical one. The longer gold-stock uplegs run, the more bullish traders grow so the more they rush to chase those big gains. Thus as popular greed mounts later in mature uplegs, gold-stock buying often accelerates fueling outsized gains. So uplegs’ overall gold-stock leverage to gold tends to gradually climb. Again as of midweek, GDX had amplified gold’s own gains by that 2.6x.

That remains way too low for a major-upleg topping in widespread greed, which often see overall leverage to gold exceed that normal 2x-to-3x range. Case in point is this sector’s last upleg birthed out of extreme stock-panic lows. After that March 2020 abyss, GDX skyrocketed 134.1% higher in just 4.8 months fueled by gold’s underlying mighty 40.0% upleg. That made for outstanding 3.4x GDX leverage over that span!

Today’s merely-average 2.6x remains way under the 3x+ usually accompanying peak greed. That argues gold stocks’ sector-sentiment pendulum is still nowhere near the greed top of its arc. That doesn’t tend to happen until gold stocks soar to really-overbought levels, which that same huge mid-2020 upleg helps to illustrate. Gold-stock overboughtness is another technical indicator illuminating where herd sentiment is.

In early August 2020 as gold stocks were peaking and greedy traders loved them, GDX had rocketed up 45% above its baseline 200-day moving average! The farther prices surge over their 200dmas, the more overbought they are reflecting more herd greed. Nearly two decades ago I developed an entire trading system using the trends of prices recast as multiples of their 200dmas, which I call Relativity Trading.

Based on the last five calendar years of data, gold-stock uplegs are not at risk of topping before GDX surges at least 35% above its 200dma. Midweek as today’s young upleg hit a new high, GDX was merely stretched 17% over that key baseline. The lack of extreme overboughtness as GDX powered higher in recent months is another technical indication the sector-sentiment pendulum remains far from universal greed.

While it has certainly swung away from late-September’s stock-panic-grade fear, it is again probably near the bottom of its arc at neutral. Traders are no longer end-of-the-world bearish on gold stocks, but most of them aren’t particularly bullish either. This gold-stock upleg shouldn’t stop powering higher until nearly everyone grows greedy and super-bullish, including individual investors. They are still warming up to gold stocks.

The gold miners’ stocks are stratified by size, majors, mid-tiers, and juniors. Majors produce over 1,000k ounces annually, juniors less than 300k, and mid-tiers in between. GDX is dominated by majors, while its little-brother GDXJ tracks mid-tiers. Professional traders like fund managers who study markets full-time and invest other people’s money traffic in majors and mid-tiers. The juniors’ market capitalizations are too small.

The fund guys are experienced and disciplined, knowing all this contrarian stuff. They analyze gold-stock trends in real-time, quickly realizing when this sector gets exceedingly oversold in suffocating herd fear. They understand that’s the time to be brave and buy low, when others are afraid. Controlling relatively-large amounts of capital, their buying is mostly limited to majors and mid-tiers driving their early-upleg gains.

Though GDX has powered 52.1% higher so far in today’s upleg, the lion’s share of those gains have come in majors and mid-tiers. The juniors are generally still lagging. Our newsletters’ trading books are full of fundamentally-superior mid-tier and junior gold and silver miners. Most of our big unrealized gains so far have accrued in the larger-market-capped companies funds can buy, juniors have underperformed.

That’s normal, because juniors are usually dominated by individual speculators and investors. The vast majority of them can’t follow the markets all day every day, leaving them less experienced and thus more susceptible to herd sentiment. Unfortunately they often sell low in popular fear near major bottomings, then stay out of gold stocks until well into subsequent uplegs. That’s when smaller juniors start running.

With juniors generally underperforming since late September, that also implies the sentiment pendulum remains far from extreme greed. Individuals are certainly less bearish on gold stocks after four months of rallying, but they aren’t particularly bullish yet. I’m blessed with some unique insights on that thanks to my decades-old business as a newsletter guy. Individual herd sentiment is readily evident there on two key fronts.

The most-important one is hard revenues. While we have plenty of professional subscribers, from a pure numbers standpoint individuals are the great majority. Unfortunately as a group they do the wrong things at the wrong times. When gold stocks are battered and bottoming, instead of bucking up and staying abreast they capitulate and flee. They give up in disgust and ostrich, missing the great buy-low opportunities.

Then later roughly halfway through gold-stock uplegs they return, starting to grow bullish after this sector’s easy gains have already been won. So our newsletter sales follow gold stocks’ upleg-correction cycles, running lower near bottomings then surging dramatically higher as uplegs mature into toppings. That’s vexing, because if it worked the opposite way individuals could buy low then sell high to multiply their fortunes.

One of the main reasons I’ve written 1,054 of these weekly web essays is to try and help people who can’t study the markets full-time understand the supreme importance of fighting herd sentiment. Trading success demands always following sectors, regardless if they are loved or hated at the time. Recently our newsletter sales are nowhere near reflecting widespread gold-stock bullishness, which hasn’t happened yet.

Also as a newsletter guy, I get tons of feedback from individual traders. That can run dozens of personal e-mails a day, sometimes soaring over a hundred at extremes! I’m really grateful for those, as they help hone my thinking. The Bible’s book of Proverbs declares “As iron sharpens iron, so one person sharpens another.” Both the raw amount of feedback and its biases also track the gold-stock upleg-correction cycles.

Back surrounding GDX’s stock-panic-grade exceedingly-oversold lows when I was pounding the table about buying dirt-cheap gold stocks, my e-mail traffic waned as discouraged individuals didn’t care. And the feedback I was getting was mostly telling me how dumb I was for not realizing gold and its miners’ stocks were heading much lower because of various bearish herd arguments. Bottomings are always like that.

Now with GDX much higher that bearish feedback has vanished and I’m getting a lot more e-mails. But they remain fairly skeptical about the staying power of this gold-stock upleg. Most are along the lines of have I considered this or that factor that could slay this upleg. Those are reflecting the herd-sentiment pendulum being closer to neutral near the bottom of its arc. That’s still a long way from topping feedback.

When major gold-stock uplegs mature after rocketing sharply to very-overbought highs, incoming e-mails explode to overwhelming numbers. And they reflect widespread popular greed, offering arguments why this sector’s powerful surge is only just starting. Individuals who missed the great majority of the upleg are rushing to buy high, the exact wrong time. That reflects peak greed, when gold-stock euphoria mounts.

The core contrarian truth of the markets is the herd is always wrong at extremes. The majority of traders are way too bearish near major bottomings, selling low and fleeing. Then they wax way too greedy near toppings, buying high and getting crushed. I’ve spent much of my professional time for nearly a quarter century trying to help individuals avoid those traps, trying to convince people being contrarian is critical for success.

There are other ways for observant traders to infer prevailing gold-stock sentiment. The leading financial television channels including CNBC and Bloomberg don’t talk about gold and gold stocks much. But near upleg toppings, sector coverage greatly expands as strong upside momentum fuels greed spilling over into mainstream markets. Commercials advertising gold coins and junior gold stocks also really proliferate.

None of that has happened yet in this current upleg, arguing sentiment remains neutral. Another way to estimate where that greed-fear pendulum may be comes from following analysts and commentators. Most of them aren’t contrarians, reflecting herd sentiment by getting bearish near correction bottomings and bullish around upleg toppings. You can verify how your favorites lean by checking their track records.

In late September when gold stocks were bottoming was their commentary calling for further selling? In August 2020 when GDX was extremely-overbought after soaring were they looking for more rallying? By checking how analysts gamed past known major gold-stock trend reversals, you can gauge what their current outlook implies for gold stocks. I argued gold was extremely overbought and topping in late July 2020.

Everything I’m seeing today, through the lens of decades of experience as a professional gold-stock speculator and newsletter guy, suggests sector sentiment remains neutral. The extreme bearishness of four months ago has passed, but we remain far from extreme bullishness. Fear is gradually being replaced by greed as GDX powers higher, but the pendulum’s arc is nowhere near its opposing peak-greed high yet.

That is very bullish for gold stocks, implying this upleg is heading much higher before giving up its ghost. While it would’ve been much better to buy in surrounding late-September’s deep lows while few wanted to, it isn’t too late to get deployed now. Although the unrealized gains are mounting in the fundamentally-superior mid-tier and junior gold and silver miners filling our trading books, way-bigger gains are likely coming.

I’ve written several comprehensive essays in recent weeks explaining why. Gold has yet to reflect this raging inflation, as we are suffering the first inflation super-spike since the 1970s thanks to extreme Fed money printing. During the last two inflation super-spikes in the 1970s, monthly-average gold prices nearly tripled during the first before more than quadrupling in the second! Gold ought to at least double here.

And the gold buying is only starting that fuels major gold uplegs. They advance in three stages, initially driven by gold-futures short-covering buying, then bigger gold-futures long buying, and finally massive investment buying. As of the latest data, 3/10ths of gold’s stage-one buying remains, fully 7/10ths of its 2.5x-more-important stage-two buying, and there has yet to be any significant stage-three investment demand!

So gold’s own upleg has a long ways to run yet, and GDX will amplify that by 2x to 3x ultimately besting that upper bound in peak greed. Also both gold and gold stocks just flashed major Golden Cross technical buy signals. Occurring after deep lows, these confirm big new uplegs are underway. They help attract back many more technically-oriented traders, and their buying accelerates gold and gold-stock gains.

If you regularly enjoy my essays, please support our hard work! For decades we’ve published popular weekly and monthly newsletters focused on contrarian speculation and investment. These essays wouldn’t exist without that revenue. Our newsletters draw on my vast experience, knowledge, wisdom, and ongoing research to explain what’s going on in the markets, why, and how to trade them with specific stocks.

That holistic integrated contrarian approach has proven very successful, yielding massive realized gains during gold uplegs like this underway next major one. We extensively research gold and silver miners to find cheap fundamentally-superior mid-tiers and juniors with outsized upside potential as gold powers higher. Our trading books are full of them already starting to soar. Subscribe today and get smarter and richer!

The bottom line is gold-stock sentiment remains neutral. The extreme bearishness surrounding recent stock-panic-grade lows has vanished, but widespread greed hasn’t replaced that universal herd fear yet. Gold stocks haven’t leveraged gold enough nor grown overbought enough to reflect popular bullishness. Their upleg gains so far have concentrated in larger miners, implying individuals are skeptical of buying in.

All this and other sentimental indicators argue that this gold-stock upleg remains young. While GDX has already powered 50%+ higher, this upleg remains much smaller than the 100%+ monsters spawned out of similar conditions. Gold’s fundamentals point to much more buying to come, which will drive it higher and gold stocks will amplify its gains. So it isn’t too late yet to get deployed if you’ve been dragging your feet.

Published by Adam Hamilton of Zeal LLC Specialising in stock-market speculation and investment from a contrarian perspective. This material has been prepared for general information purposes and must not be construed as investment advice.