In February, we wrote about the upcoming gold mining share breakout and how it might compare to past gold share breakouts. The GDX closed last week at a fresh 7-year high and closed + 9% above its previous high in daily and weekly comparisons. Now he has a measured upside target at $ 50. While the breakout is significant for a variety of reasons, it is likely to hold as the GDX has also broken out against the S&P 500. Even though precious metals formed a bottom in January 2016, they have only consistently outperformed the stock market recently.The relationship between GDX and S&P 500 broke to a 3.5-year high. This signals that capital is now moving away from the stock market and towards gold stocks.
Only time will show the significance of this breakout. But we have some ideas. First, we can take a look at the history of breakouts in gold mining stocks.Regardless of the historical index we use (Barron’s Gold Mining is below), each of them generates the same conclusion. There is a massive and epic breakout (the early 1960s); one who had the opportunity but ultimately failed to copy the historical breakout due to disinflation (2005); and several smaller breakouts, which were followed by strong performance (1972, early 2000s).