Gold Miners’ Stocks Surge Reversed Due to Gold’s Sharp Reversal – What Does This Mean for Your Finances?
As the world’s leading investment manager and financial market journalist, I have been closely monitoring the dramatic surge in gold miners’ stocks that occurred just a couple of weeks ago. The mounting bullish sentiment attracted traders back to the sector, pushing the leading gold-stock ETF to secular highs not seen in over a dozen years. However, this strong momentum has since reversed, with gold stocks now experiencing a selloff as gold itself has sharply reversed from extreme overbought levels.
Before the chaos unleashed by Trump’s reciprocal-tariffs announcement in early April, the leading GDX gold-stock ETF was performing well in 2025. It had risen by 35.6% year-to-date by the end of March, outpacing gold’s gain of 19.0% by a factor of 1.9x. While this was a decent performance, historically gold stocks have tended to leverage significant moves by 2x to 3x. The degree of outperformance reflects market sentiment.
Following Trump’s press conference, which generated extreme fear in the markets, gold stocks were hit hard as stock markets plunged. On April 4th, as the S&P 500 dropped by 6.0%, GDX experienced an even greater decline of 8.8%. This marked the worst down day for gold stocks since March 2020 during the pandemic-induced stock panic. However, in the days that followed, the miners rebounded strongly alongside gold in a V-shaped recovery.
Within just six trading days into mid-April, GDX surged by a massive 25.1%, outpacing gold’s 11.9% increase by a factor of 2.1x. With both gold and its miners rallying, trader interest in gold stocks increased significantly, leading to higher coverage in mainstream financial media outlets like CNBC and Bloomberg. While the growing bullish sentiment was exciting, a serious downside risk emerged due to gold’s extreme overbought levels.
Gold had climbed to unprecedented levels of overboughtness, as I detailed in a recent analysis. The rapid rally pushed gold to a level 1.266x above its 200-day moving average, a rare occurrence that signaled heightened risk. To better understand the potential danger for gold, I examined past gold movements since 1971.
The surge in gold to extreme overbought levels extended its cyclical bull run that began in early October 2023, resulting in gains of 88.0% over 18.5 months. While this ranked as the sixth-largest cyclical bull run for gold since 1971, the top four occurred in the 1970s and were driven by unique circumstances. Excluding those outlier periods, the next 10 largest cyclical bull runs averaged gains of 58.0% over 13.9 months, peaking at an average of 1.265x gold’s 200-day moving average, similar to the current situation.
After these massive cyclical bull runs, gold typically experienced significant selloffs, with average losses of 15.5% over a quick 1.9 months. In light of these findings, I changed my bias on gold to short in our newsletter on April 22nd, anticipating a potential pullback. Given that gold miners’ profits and stock prices tend to leverage gold’s movements, it is crucial to be prepared for significant drawdowns in the sector.
During the current cyclical gold bull market, which has not yet seen a correction of 10% or more, gold miners have followed gold lower during pullbacks, despite their strong fundamentals. This pattern is illustrated in past episodes during the current gold bull run, highlighting the volatility of the sector.
From early October 2023 to late December of that year, gold and GDX experienced ups and downs, with GDX exhibiting both upside and downside leverage compared to gold’s movements. Despite minor pullbacks, gold stocks have been prone to overreacting to market fluctuations, leading to significant losses in certain periods.
As gold continues its remarkable run, traders should be aware of the potential risks associated with overbought conditions and historical patterns of selloffs following rapid price increases. While gold stocks have the potential for significant gains, they also face the risk of substantial losses during market downturns. It is essential for investors to carefully monitor market conditions and adjust their strategies accordingly to navigate the volatility in the gold sector.
Unprecedented Gold Rally Sparks Concerns of Imminent Correction: A Detailed Analysis of What’s Next for Gold Stocks
In a recent turn of events, gold experienced a slight 4.6% pullback, causing concerns among investors. However, the gold miners’ ETF GDX plummeted by 9.8%, amplifying gold’s performance by 2.1x. Despite this, gold remains a top choice for portfolio diversification during times of stock market volatility.
Following a significant surge in gold prices by 14.8% in a short period, GDX also saw a 25.2% increase. This rapid rise in gold prices pushed it to an overbought position, indicating a potential correction-grade selloff. Historical data shows that after similar bullish cycles, gold tends to experience a 15% correction over 1.9 months, bringing it back down near $2,891.
It is crucial to note that corrections are a normal part of the market cycle and often lead to healthy rebalancing. If gold undergoes a correction, gold miners’ stocks are likely to face challenges. Historically, GDX has amplified gold’s movements by 2x to 3x, suggesting a significant downside in gold stocks in the near future.
Despite the looming correction, gold miners’ fundamentals remain strong, with earnings hitting record highs quarter after quarter. As gold miners prepare to report their Q1’25 results, there is optimism about the sector’s future growth potential. The sector’s earnings have seen a substantial increase in recent quarters, showcasing the sector’s resilience and profitability.
In conclusion, while a correction in gold and gold stocks may be on the horizon, it presents an opportunity for investors to enter the market at lower prices. By focusing on fundamentally-sound gold miners, investors can position themselves for long-term success in the sector. Overall, the outlook for gold remains positive, with the potential for further gains in the future. Gold Due for Correction as Overbought Levels Signal Impending Rebalance
As the world’s top investment manager and financial market journalist, I am here to alert you to the imminent correction in the gold market. After skyrocketing to unsustainable overbought levels, gold is poised for a significant pullback to realign with more reasonable technicals and sentiment.
Historical data spanning the past fifty years indicates that gold typically corrects around 15% over a couple of months in such scenarios. While this is a normal and healthy occurrence within larger bullish trends, it is important to note that major gold stocks tend to magnify post-cyclical-bull selloffs by 2x to 3x.
This suggests that gold stocks could potentially shed a third of their value in a rapid cyclical bear market in the coming months. Traders who currently hold positions in gold should consider tightening their stop losses to safeguard their unrealized gains.
Although a gold correction may drag down gold stocks, the underlying fundamentals of mining companies remain strong. This presents a lucrative buying opportunity for well-prepared traders once the correction runs its course.
In conclusion, while a correction in the gold market may seem daunting, it is a necessary step to maintain a healthy market balance. By staying informed and proactive, traders can navigate through these fluctuations and capitalize on the opportunities that arise. Stay vigilant and be prepared to seize the moment when the time is right.