2012 and 2013 were years that gold investors would like to forget. Yet at the same time the brutal bear market of 2012-2013 in gold mining shares has planted the seeds for the next bull run. As it stands now, 2014 is shaping up to be the year that the next cyclical bull market in the gold miners begins and the importance of last Thursday cannot be overstated:

Click to enlarge

GDX_Daily_6.23.2014

The Weekly chart illustrates the considerable upside potential from the large H&S bottom which has formed during the last year:

 

GDX_Weekly_6.23.2014

Even after the recent 20% advance, it is far from inconceivable that the GDX could rally another 30%+ before year end. The facts supporting the bullish camp are quite clear:

  • From a cost containment standpoint the senior gold producers have never been better positioned than they are now
  • Portfolio managers are unanimously underweight gold mining shares
  • Existing low cost gold producers stand to benefit greatly over the coming years from the major challenges facing new mine construction & financing

New_Gold_Mine

Source: Advisor Perspectives

  • Global central banks are committed to fiat devaluation and combating the pernicious effects of disinflation - gold stands to benefit longer term from this secular shift in central bank monetary policy