Gold stocks seem poised for a powerful resurgence in 2023 after a relatively lackluster performance for most of 2022. Although gold prices began rising toward the end of the year, factors such as inflation coupled with a strong dollar and an increasingly tight monetary policy by the U.S. Federal Reserve eroded gold’s appeal as a safe haven metal and kept its prices down.
Early projections released toward the end of last year showed that the gold market had plenty of room for growth in 2023, especially if the federal reserve chose to stabilize benchmark interest rates or even reduce them.
Gold miner stocks started the year strongly enough to raise hopes that they will continue surging to new heights into the year. In fact, gold stocks are performing so well they are getting close to one of their best buy signals despite recently bottoming after investors exceedingly oversold their gold stocks.
Sentiment across the gold market has shifted to bullish as gold prices grew steadily toward the end of 2022 and the start of 2023. The GDX VanEck Gold Miners EFT, for instance, has proven to be the leading benchmark of gold stocks, increasing in price by 41.4% over the three-plus months since September 2022. And in spite of a significant upside breakout, the GDX has soared past its key 200-day moving average and is poised to reach a powerful Golden Cross buy signal in the next few weeks.
Analysts and industry insiders expect the upcoming year to be significantly bullish because golden crosses tend to be strong bullish after extremely oversold lows covering several years. When this happens, the market usually experiences strong accelerating uplegs, pushing gold prices higher with room for even higher growth.
On the other hand, lesser gold crosses are common in sideways-shifting consolidating markets that aren’t recovering from significant lows. This is extremely evident in the GDX, which saw its largest drop in mid-2022 as prices for its major gold stocks tanked. By late September, major gold stocks in the GDX EFT had dropped by 46.5% over five-plus months.
The GDX finally bottomed out at $21.87, a low it hadn’t seen in two and a half years since the lockdown in March 2020 triggered panic among stockholders. GDX’s major gold stocks had recovered relatively well by April 2022, rising by 41.4% in six-plus months amid a growing gold upleg. If the fed chooses to stabilize or lower benchmark interest rates in 2023, gold prices may rally even higher.
If this expected rally materializes, mining companies such as Royal Gold Inc. (NASDAQ: RGLD) could be set to offer exceptional shareholder value.
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