The time ahead for gold miners is slated to become even better than the present year which has been a great year for the gold miners, according to strategist Larry McDonald.
In 2016 there has been a 68 percent rise in the gold miners ETF, a popular way to play the group. This is despite the fact that there has been a significant fall in the volatile stocks since their mid-August peak. At that point in time the GDX was up more than 125 percent in 2016.
Pushed down by a serious rise in bond yields and in the U.S. dollar, unsurprisingly, the move has come as gold took a major leg lower. And in turn, as expectations for a 2016 Federal Reserve hike have risen, these moves have come along.
And yet, these expectations will fall by the wayside, as they have so many times before, thinks McDonald.
"The market's going to push the Fed until the Fed breaks and doesn't hike," the strategist said on CNBC's “Trading Nation”. McDonald was referring to the theory that the central bank's plans would change by a rise in volatility that he expects to see.
He added that when that happens, "gold miners will be the best place to be."
"The risk reward even [in] the shorter term is quite good as the market is almost fully in the December hike camp. If those chances are to change to the downside, miners will be a great beneficiary," he said.
Highly exposed to Fed policy is gold and the companies that dig it out of the ground. Gold, a commodity that yields nothing and is denominated in dollars, can be hurt by both higher long-term yields and a stronger dollar, which can happen from Fed rate rises. In fact, trading gold miners is akin to "literally trading Fed policy," McDonald goes so far as saying.
McDonald wrote to a TV program that "gold miners are a screaming buy" with Fed policy expectations set to adjust. A similar view point is seemed to be shared by many analysts. Analysts believe the stocks in the GDX have a median upside of 37 percent, based on their target prices, notes S&P Global equity chief investment officer Erin Gibbs.
"It seems that Wall Street analysts agree with Larry," Gibbs wrote to CNBC on Friday.
Expectations are for a substantial rise in earnings — and "considering these earnings expectations, I think it's definitely a safe bet for the fourth quarter," while valuations appear high, added Gibbs.
This it has been profitable to rely on the bold calls that were made by McDonald on the gold miners. Buying the gold miners was "the best trade in the world," McDonald has said in January even as the group languished at that time. And then he called the stocks "very overbought" in June as the miners were approaching (but had not yet achieved) their high.
(Source:www.cnbc.com)
In 2016 there has been a 68 percent rise in the gold miners ETF, a popular way to play the group. This is despite the fact that there has been a significant fall in the volatile stocks since their mid-August peak. At that point in time the GDX was up more than 125 percent in 2016.
Pushed down by a serious rise in bond yields and in the U.S. dollar, unsurprisingly, the move has come as gold took a major leg lower. And in turn, as expectations for a 2016 Federal Reserve hike have risen, these moves have come along.
And yet, these expectations will fall by the wayside, as they have so many times before, thinks McDonald.
"The market's going to push the Fed until the Fed breaks and doesn't hike," the strategist said on CNBC's “Trading Nation”. McDonald was referring to the theory that the central bank's plans would change by a rise in volatility that he expects to see.
He added that when that happens, "gold miners will be the best place to be."
"The risk reward even [in] the shorter term is quite good as the market is almost fully in the December hike camp. If those chances are to change to the downside, miners will be a great beneficiary," he said.
Highly exposed to Fed policy is gold and the companies that dig it out of the ground. Gold, a commodity that yields nothing and is denominated in dollars, can be hurt by both higher long-term yields and a stronger dollar, which can happen from Fed rate rises. In fact, trading gold miners is akin to "literally trading Fed policy," McDonald goes so far as saying.
McDonald wrote to a TV program that "gold miners are a screaming buy" with Fed policy expectations set to adjust. A similar view point is seemed to be shared by many analysts. Analysts believe the stocks in the GDX have a median upside of 37 percent, based on their target prices, notes S&P Global equity chief investment officer Erin Gibbs.
"It seems that Wall Street analysts agree with Larry," Gibbs wrote to CNBC on Friday.
Expectations are for a substantial rise in earnings — and "considering these earnings expectations, I think it's definitely a safe bet for the fourth quarter," while valuations appear high, added Gibbs.
This it has been profitable to rely on the bold calls that were made by McDonald on the gold miners. Buying the gold miners was "the best trade in the world," McDonald has said in January even as the group languished at that time. And then he called the stocks "very overbought" in June as the miners were approaching (but had not yet achieved) their high.
(Source:www.cnbc.com)
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