Within
the junior resource market, few segments are the topic of debate as much as
gold is. Gold can’t go high enough for optimists and it can’t go low enough for
pessimists. For the average investor, the competing viewpoints cause a lot of
confusion, leading to misguided investments and considerable fear.
But one
gold expert ignores the rhetoric and looks instead to the numbers – to the
technical analysis of gold and gold stocks – to guide his thinking. Jordan Roy
Byrne, a Chartered Market Technician and founder of The Daily Gold (and a big
Sea Hawks fan!), spoke at the Cambridge House International Vancouver Resource
Investment Conference (2014). We caught up to him at the conference shortly
after his presentation to ask him about it and to get his insight into gold
prices – now and in the future.
We first
asked him for a quick summary of his presentation. He said: “I spoke about my
outlook for the year with regard to precious metals and how, last week, I
publicly said that the bottom is in for gold stocks and silver stocks… and more
specifically for the smaller gold and silver companies.” Then he added, “It’s
definitely in for the smaller companies and likely in for the seniors.”
Then he
briefly expanded on his market analysis for us: “If you look at the Toronto
Venture Exchange, the bottom was in late June.” One of the ways he determined
the bottom is by building his own index: “I took 15 of my favorite
companies—some of them are large, some are small, some are emerging producers –
and I put those stocks into an ‘index’. That index bottomed in June and then
made a higher low in December.”
Even
though it was a higher low, Mr. Roy-Byrne expected it to go even lower: “In
late December, myself and other people were expecting the market to plunge – to
have that final sell-off. But that never happened and now we’re seeing a big
rally. It’s tough to say if metals are going to have another dip, then we could
see stocks consolidate after these gains. But I do think that if the bottom
isn’t in for the metals, when it comes about, you’re going to see a huge
rally.” Mr. Roy-Byrne points to a similar historical gold event to inform his
perspective: “After gold bottomed in 2001, gold just bumped up a little bit,
the stocks were up, the HUI Gold Bugs Index was up 67% in only 2 months. I
think times are finally looking up.”
Additionally,
economic forces have surprised investors, which are also having an effect on
the gold prices: “There was an extreme amount of bearish sentiment in December.
Various sentiment indicators were at 10 year lows, 12 year lows. The time was
right to see a final plunge and we didn’t see it. At the same time, with regard
to the taper in the US, the initial reaction to the taper was negative for
precious metals. But since, precious metals have been performing well and
outperforming US equities. For some people, that might be counter-intuitive but
that should tell you something: All the recent Quantitative Easing was not good
for precious metal stocks. They were in a bear market. And now we get the taper,
which people expect is going to be bearish but the lasting reaction is bullish.
And you could say the same thing about elevated interest rates and a lot of
main street people were saying that it would be negative for precious metals
but it is possible that the higher interest rates will be bullish for the
sector.”
So, what
should investors do right now with this past low and potential rally? Mr.
Roy-Byrne shared his insight with our readers: “I think it’s possible that we
could have one more dip lower in metals prices. If that were to happen, I still
think that the juniors have bottomed; I don’t think they’re going to make a new
low if that’s the case. But given that, I still think it’s possible that we
could see companies go because metals prices and market sentiment are not the
sole drivers. We’re starting to see the wheat separate from the chaff. Even
though market conditions are going to be greatly improved this year, it doesn’t
mean that everyone is out of the woods yet.”
For
investors who want to hear more of what Mr. Roy-Byrne has to say, they can
visit his website, TheDailyGold.com, which contains a lot of free information.
“I’m writing an editorial per week and I do share some premium content
occasionally. I interview companies and analysts,” he explained. Additionally,
his premium newsletter focuses on stock selection and market timing. “I use my
technical background to try and time the market. That gets a bad omen but we’re
really trying to use that to provide people some risk management. So it’s market
timing and stock selection – looking for the best juniors out there: what they
should look for when picking stocks, what kind of criteria; where they should
start their research.”
For
investors who are interested in getting back into gold now that the bottom may
be here, Mr. Roy-Byrne’s insight can guide those investors to approach the
market intelligently – and perhaps still a little cautiously if there is to be
another dip – but to look forward to some exciting gains in the future.
REFERENCES
The Daily
Gold: http://thedailygold.com/
Cambridge
House International’s Vancouver Resource Investment Conference: http://cambridgehouse.com/event/vancouver-resource-investment-conference-2014