The gold rush is here…
Literally. Gold prices have risen an incredible 38.8% the past year.
This has caused the shiny metal to take top news slots all over financial media. One buzzworthy article I’m sure you’ve read mentioned how club retailer Costco (COST) can’t keep 1-ounce gold bars in stock.
Investors and hoarders are evidently scooping up gold at a breakneck pace.
This commodity landgrab has also sent gold stocks rallying; some are venturing into extreme overbought territory.
That’s where today’s signal study comes into play.
First, we’ll take a glance at the stunning run for gold in 2024. Then we’ll take stock of Franco-Nevada (FNV), a gold-mining company that is flashing the red light.
Over the short run, if you’re on the sidelines looking to cash in on the gold-stock wave, history says you may want to sit tight for a bit. And if you’re already up big on this trade, consider paring back a little.
Let’s dig in.
Gold’s Three-Month Run Leaves the S&P 500 in the Dust
Commodities have been quiet for most of the year. That is, until recently.
Precious metals like gold and silver have made staggering leaps. You can see this clearly with the SPDR Gold Shares ETF (GLD) and the iShares Silver Trust ETF (SLV) up 14.4% and 19.3%, respectively, in the past three months.
And this has caused a 17.8% surge in the VanEck Gold Miners ETF (GDX), which includes a basket of gold mining equities.
All three have massively beaten the SPDR S&P 500 ETF (SPY), which is up 5.3% in those same three months:
When commodity prices rally, precious-metal miners benefit in a number of ways.
Higher metal prices can lead to higher margins and revenues. Additionally, this can lead to increased production.
As gold and silver make highs, the incentives to mine more and more only accelerate.
Thus, gold-mining equities rise in value as the expected profit growth booms.
Sounds easy, right?!
Just be early on the trend. Jump in late, and the odds of profit are stacked against you.
Sometimes excitement like this leads to an overbought signal…one that history suggests is a rip you don’t want to buy. That certainly applies to one well-known gold stock participating in this rally…
Gold Miner Franco-Nevada Reaches Rare Overbought Signal
Founded in 1983, FNV is a leading gold-focused royalty streamer. It’s one of the easiest plays for an investor to get exposure to the gold-mining industry.
And it’s not a tiny operation. In 2025, Wall Street expects Franco-Nevada to generate $1.3 billion in revenues and $755 million in net income.
This company is no slouch on the fundamental front… nor on the technical front, either.
In three months, shares of FNV have risen nearly 9%:
What makes this rally unique is the steep rally off to the right above. That’s 10 consecutive days of higher prices.
In fact, it’s the second time it’s reached this extreme buy zone, with the last one occurring back in April 2018. And the outcome wasn’t good:
- One week later, the stock had fallen 2.9%.
- One month later, the stock was 2.2% lower.
- Two months later, the trend remained negative, with shares down 3.1%.
Now, I’m not trying to pour cold water in your gold pan. Just recognize that we are in rare territory with the latest rally.
The sample size here is small, but more importantly it’s a hidden insight spotlighting how big of a move we’re witnessing.
— Lucas Downey
Contributing Editor, TradeSmith Daily
His award-winning system pinpointed NVDA and META before both stocks doubled. Now it's flashing "BUY" on this under-the-radar A.I. stock. MORE HERE...
Source: Trade Smith