Tax Loss Liquidation Hits Gold Stocks

Gold stocks have been absolutely obliterated the past 3.5 months.  What’s interesting though is the high volume reversal that occurred in early October was completely negated and instead we are ending October with what appears to be forced liquidation.  The reason I can say that is this is only occurring in gold stocks, there isn’t a liquidation occurring in any of the other commodity sectors or in commodities themselves.

Mutual fund tax loss selling ends October 31, so my guess is they are being forced to realize losses in unfavorable conditions and it’s exacerbating what would normally take place.  GDXJ and GDX both set volume records today and many gold stocks were sold off on huge volume.

gdx

You have stocks like SAND that are down 62% in 3.5 months, that’s pretty incredible given the fact gold is off just $80 in the same time period.  I’m expecting a huge reversal in many of these stocks soon after these funds are forced to liquidate here at the bottom.  This is a tremendous opportunity that doesn’t come around very often.

sand

 

Leave a Reply

Your email address will not be published. Required fields are marked *