In a world full of overvalued stock markets, a market strategist takes another look at the mining industry, which continues to be overlooked by general investors. Jesse Felder, the creator of the Felder report and former Bear Sterns analyst, says in his latest market report that widespread pessimism in the precious metals market has once again made the mining industry relatively cheap. Jesse Felder made the same call back in 2018 when he suggested investors look into the series of stocks he calls BANG (Barrick, Agnico Eagle, Newmont/Goldcorp) and FANG (Facebook, Amazon, Netflix, Google). The VanEck Gold Miners ETF, which represents top gold producers, is up 44% since Felder’s first call in May 2018. The ETF peaked in July 2020, which represents a gain of around 90%.
Jesse Felder explains why gold stocks are bullish on dollar series
Jesse Felder now says he sees the same conditions as three years ago. The analyst states that despite record margins, increased cash flow and improved balance sheets, the mining industry remains uninterested as gold prices are stuck in yellow consolidation. Jesse Felder describes the current performance of the mining industry as “absolutely pathetic compared to the S&P 500.” The analyst highlights the following points in the report:
Part of this is due to the excellent performance of the vast exchange led by the likes of FANG. But that gap could be closed by a stock market (due to an earnings recession next year).
Jesse Felder adds that he has taken a bullish position in the gold stocks series as he expects the gold prices to rise eventually:
If, like me, you believe that gold prices are only in the midst of a new long-term bull market (as the history of previous bull markets for the precious metal has shown), then gold mining shares are very cheap compared to today’s gold prices.
Fed’s wind is preventing the rise of gold?
As you can follow from news, gold fiadollaryellow struggled to gain new momentum and managed to rise above $ 1,800. At the time of writing, gold price was trading at $1,806, up 1.30% daily, while December gold futures rose 1.44% daily to $1,807. Analyst Jesse Felder states that the value of gold fell in May as investors ignored the growing threat of inflation.
Analyst says gold is facing some significant headwinds as the Federal Reserve prepares to tighten monetary policy by starting to cut monthly bond purchases before the end of the year. Meanwhile, tighter monetary policy expectations pushed the US dollar closer to one-year highs. At the same time, US 10-year yields have more than doubled from last year and are currently trading around 1.67%.