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Gold Stocks and the Coming Judas Swing

January 29, 2024

[This week’s commentary was written by David Isham, a longtime Rick’s Picks subscribers from Northern California who has been investing in bullion since he was in grade school four decades ago. RA ]

Although gold appears to have broken out of a triple top and recently hit fresh all-time highs at $2152, the gold miners are trading at the same prices they were 20 years ago. I believe this strange disconnect is going to change this year, since gold is finally starting to outperform the CRB commodities index, oil in particular. Because energy makes up 60% of a mining company’s costs, this implies the miners are about to become more profitable. Every bull or bear market has three phases — accumulation, manipulation and distribution. We are in the accumulation phase now, where smart money is accumulating gold mining shares for the coming, multiyear bull market. Next will come the manipulation phase, also known as ‘The Judas Swing’.  Aptly named for Judas’ betrayal of Jesus, in the stock-market world it is defined as a false move preceding a real move in the opposite direction.

Telltale Sign

One of the telltale signs that the miners have embarked on a new bull market will be a show of relative strength if the price of physical gold drops significantly in the months ahead. If mining stocks don’t fall as much percentage-wise, gold investors should take encouragement, since the rise that follows will mark the likely resumption of the long-term bull market begun nearly two decades ago.  Finally, there will be a distribution phase where miners go parabolic and the public jumps in belatedly, buying stocks at or near the top.

No one can say for sure how deeply gold will correct before it turns to embark on a spectacular run-up, but I wouldn’t be surprised to see it take out October’s lows near $1600. That is an obvious place to run stops and clear out long-suffering gold bugs so that bullion can rise with a lightness that is unimpeded by their too-eager profit-taking.

A Date in July

As to when this might occur, there’s an interesting cycle date to watch in July. It is based on an 8.6-year pattern that rules many things in this world, including weather and human behavior.  It’s no coincidence that the average length of marriages ending in divorce is approximately eight years. Add in legal proceedings and you get 8.6 years from beginning to end. Why is 8.6 years a special number? It is equal to 3141 days. Recognize that number? It is pi, so 8.6 years is a circle expressed in time.  Half a cycle is 4.3 years, or 1570 days. If we extend the March 2020 lows in the metals forward by 4.3 years, it takes us to July 2024.  If the metals head lower into early July and then reverse, you can therefore infer that the bull is back.

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Nevada accounts for 75% of U.S. gold production.
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