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Gold and Silver Soar on Brexit Vote but Mining Stocks Remain Vastly Undervalued

Gold rocketed nearly $100 higher to $1,350 in early morning trading, smashing through key resistance. Silver rallied nearly $1, also breaking through resistance at $18. This is happening despite a sharply higher USD. This spike in precious metals and the dollar is being driven by the “Leave” vote taking an unexpected lead in the UK referendum. With only a few local authorities still left to be counted, the “Leave” vote is winning 52% to 48%.

brexit wins

If the leave vote it confirmed, it will be a big blow to globalists that are hell bent on centralizing political power.

Nigel Farage, who has spearheaded the United Kingdom’s departure from the European Union, addressed the Brexit faithful at a referendum party. He said:

“The dawn is breaking on a independent UK. If the predictions are right this will be a victory for the real people, for the ordinary people, and for the decent people.”

“We’ve fought against the multinationals, the merchant banks and big politics’ lies corruption and deceit.

“We’ve done it without having to fire a single bullet but through hard work and graft.

“We’ve done it not just for ourselves but for the whole of Europe. I hope this victory brings down this failed project.”

“Let’s get rid of Brussels and all that has gone wrong. Let June 23 go down as our Independence Day.”

After branding the EU a “failed project”, the outspoken anti-Brussels campaigner called for David Cameron to resign “immediately” as Prime Minister.

To get a better idea of the implications of this vote, check out this article: This was the day the British people defied their jailers.

Gold Price Rockets Higher

Gold and silver are both rocketing higher on this news, as investors flee equity markets in favor of safe haven assets. Despite the huge move this year in precious metals, gold stocks remain very undervalued. The following charts from Palisade Research help to illustrate this point.

The first chart shows the Bloomberg Commodity Index relative to the S&P 500. The wider the gap, the more undervalued commodities are relative to stocks. There will eventually be a reversion driven by a drop in equity prices, rise in commodity prices or most likely a combination of both.

gold vs sp500

Comparing the current bull market run in the TSX Venture exchange to past bull market runs, we can see that the current bull has plenty of room to run. The last two bull markets lasted 1,142 days and 573 days, respectively, and yielded returns of 266% and 222%. The current bull market has lasted less than 200 days old and could advance another 5X to match prior bull market returns.

gold bull market young

The ratio between the Gold BUGS Index and the price of gold bottomed in late 2015 and has spiked higher this year. While gold stocks have been performing very well, the HUI still has plenty of catching up to do. It needs to kick into overdrive to reach a historical median. I expect a continuation of the strong leverage that mining stocks have been offering as of late.

hui to gold index

No matter the official results of the UK referendum, I expect much higher gold and silver prices by year end. This bull market is just getting started. While gold and gold mining stocks have done very well this year, the greatest returns have come from junior silver miners. If silver returns toward the previous highs near $50 per ounce, silver mining stocks are going to go ballistic.

There are a handful of these silver mining stocks that we either hold in the GSB portfolio or have on our target list. To view the GSB portfolio in real time, get the top-rated monthly newsletter and our weekly trade alerts, click here now or on the button below.

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By | 2017-03-23T14:06:48+00:00 June 23rd, 2016|Gold & Silver Commentary|

About the Author:

Jason is the founder of goldstockbull.com. He previously worked in data analytics for the world’s largest research firm, consulting to Fortune 500 companies globally. Jason eventually leveraged those skills to trade successfully full-time and after helping friends and family optimize their investments, he launched Gold Stock Bull and The GSB Contrarian Report newsletter. Jason is a cycles investor with a contrarian eye for identifying undervalued assets. He has built an expertise in both the precious metals and cryptocurrency markets. Jason believes in honest money, limited government, decentralization of power and enjoys studying alternative economic models.