David Erfle: Technical Bottom in for Gold Stocks, Where to Find Opportunity
Interesting gold price action has been brought on in recent weeks by factors like the ongoing war between Russia and Ukraine, as well as last week’s US Federal Reserve meeting.
The yellow metal is still trading at elevated levels, but will its gains stick? David Erfle, editor and founder of Junior Miner Junky, said he sees support trying to hold at the US$1,900 or US$1,920 per ounce level.
However, he told the Investing News Network, he wouldn’t be surprised to see gold test US$1,850 since it was facing “strong resistance” there before the conflict allowed it to break out.
Erfle is bullish overall moving forward, and noted that when the Fed begins a new cycle of hiking interest rates, that tends to mark a low point in the gold market. In this case, the central bank’s plans were telegraphed far in advance, and gold companies began to bottom about six months ago.
“The gold stocks have now technically put in a bottom — both the VanEck Gold Miners ETF (ARCA:GDX) and the VanEck Junior Gold Miners ETF (ARCA:GDXJ) have technically put in six month bottoms,” he said.
When asked where he’s focusing right now in terms of stocks, Erfle said he’s been acquiring later-stage junior developers that are at the feasibility stage, or at or close to the financing phase. Many have experienced significant selloffs, but he believes that looks set to change with financing becoming more accessible, and with market participants realizing that the assets held by these companies have good margins with a more elevated gold price.
Erfle anticipates more gold M&A this year, and noted that single asset developers and producers will likely continue to be taken out by larger companies. Earlier-stage companies are also gaining attention from global miners.
“I expect to see a couple more mergers of equals as well, because let’s face it — this sector needs more consolidation. To attract generalist capital, these companies need to get bigger,” he explained.
Watch the video above for more from Erfle on gold and gold stocks.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.