Bond yields tumbling, stocks crashing, gold trading above US$1650....sounds like the perfect formula for a gold mining stock rally right? 

Wrong. 

Not if all of this is happening during the last week of February when the BMO Metals & Mining Conference is taking place in Hollywood, Florida. The GDX was down 3.5% and the GDXJ was down 5.25% today after gold could not hold above US$1650:

GDXJ (Weekly)

Gold stocks have a tendency to sell-off during the last week of February when the BMO Metals & Mining Conference is taking place in Hollywood, Florida 

This is set to be the 4th year in a row that gold miners fall during BMO week. In addition, i'm afraid to point out that this year's chart setup looks eerily similar to 2017 when gold stocks sold off against a similar backdrop of a relatively strong gold price and proceeded to enter a multi-week correction (largely blamed on the GDXJ rebalancing).  

With many junior gold mining stocks down double-digit percentages on the trading session, investors are left shaking their heads while double-checking the gold price quote.."..gold is still above $1600 and near multi-year highs isn't it?."

It's pretty clear that the hedge fund playbook has at least one chapter on selling gold stocks during this week of the year. The global panic stemming from corona virus pandemic fears has only served to accelerate today's selling in the precious metals space as market participants seek liquidity. There is truly no safe haven when investors are fearful and looking for liquidity at virtually any cost. 

I deployed some dry powder in the junior mining sector today, but I can tell you it was pretty uncomfortable. Fear is rising for the first time in a long time, and the VIX ticking above 30 for the first time since 2018 is as clear a sign as any that fear is permeating the air:

VIX (Daily - Two Year)

The sharp end of session divergence between gold and the VIX is a strong indication that gold is now being used more as a source of liquidity and less as a fear hedge. 

VIX (30-minute with GLD at top and VIX/GLD correlation at bottom)


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