It now seems like eons ago but at the end of last year I published a post titled “6 Big Surprises for 2015” in which I laid out a series of seemingly unlikely market events which I felt were much likelier to occur than the consensus believed. While it’s definitely too early to judge the accuracy of my surprise predictions there are a few that look pretty good and one that has already happened (EUR/USD falling below $1.10).
My #5 surprise had to do with equity sector performance in which I stated the following:
“5. Utilities (falling long rates and flight to safety) and gold miners (rallying from a low base along with gold performing well despite a strong dollar) will be the best performing equity sectors during 2015 while financials and retailers will be the worst (weak growth and flattening yield curve).”
Utilities haven’t performed well, however, gold miners are certainly among the top performing sectors thus far in 2015 with a 9.4% gain year-to-date. Moreover, the gold miners appear poised for further gains this year as the long term downtrend appears to be evolving into a nascent uptrend:
Perhaps most interesting to note about the gold miners as a sector is that the senior producers (GDX) are up more than double the amount of the junior explorers (GDXJ +4.2%); this phenomenon makes sense due to the fact that the seniors have larger cash balances and generally lower production costs which allows them to survive periods of depressed gold prices.
If and when gold moves back above $1250 decisively we should expect this relative performance between GDX and GDXJ to flip with GDXJ outperforming GDX. A couple of our favorite non-producing gold names are Continental Gold (CNL.TO) and Pretium Resources (PVG). PVG, in particular, has formed a beautiful potential chart bottom during the past couple of years which holds considerable upside potential in the event of a breakout above resistance: