On July 27th, NIA introduced its members to the NASDAQ Biotechnology/HUI Gold Miners Ratio – a ratio that NIA created between the NASDAQ Biotechnology Index (NBI), an index of NASDAQ listed biotechnology stocks; and the NYSE ARCA Gold Bugs Index (HUI), an index of US traded gold & silver mining stocks.
If you had $10,000 to invest in 1996: the simple act of buying biotech stocks when the ratio was near historical lows then selling biotech stocks/buying gold & silver mining stocks when the ratio was near historical highs – and continuing to shift your full investment capital back and forth between the two following extreme multi-year swings in the ratio; would have allowed you to turn $10,000 into $4.65 million in less than 20 years.
NIA discussed in its July 27th report how the NASDAQ Biotechnology/HUI Gold Miners Ratio had just surpassed its 2000 peak of 34.39 and reached a new all-time high. NIA predicted that the ratio was about to make a dramatic short-term decline and would inevitably fall back to its long-term median of 3.35 as a result of gold & silver mining stocks rallying big at the same time that biotech stocks crash.
The NASDAQ Biotechnology/HUI Gold Miners Ratio finished July 27th at 35.68 and peaked on August 5th at a record high closing price of 38.60. Since then, it has declined by a dramatic 14.38 or 37.25% to finish last week at 24.22. Just like NIA predicted, this decline was fueled by biotech stocks crashing 20.2% while gold & silver mining stocks simultaneously rallied by 27.2%!
Gains for gold & silver miners and losses for biotech stocks are about to greatly accelerate – because with the downtrend of the ratio now firmly established, a return to the ratio’s median of 3.35 will start to appear inevitable – causing word about it to spread to mainstream investor groups.
During the ratio’s 2000-2002 free fall, it needed 81 weeks to decline from 24.22 down to its long-term median of 3.35. If history repeats itself, the NASDAQ Biotechnology/HUI Gold Miners Ratio will once again reach its long-term median of 3.35 on May 1, 2017.
For this to occur, between today and May 1, 2017, either gold & silver mining stocks will need to rise another 623% or biotech stocks will need to crash an additional 86% – or we could see a combination of the two with perhaps biotech stocks crashing 40% while gold & silver mining stocks simultaneously rise 334%.
Amazingly, there is one individual gold & silver mining stock that totally stands alone as currently having the industry’s strongest possible fundamentals for 2016 – while also having the most bullish possible technicals for the rest of 2015: Great Panther Silver (GPL). Just like NIA predicted, GPL began breaking out big in recent days and showed incredible strength by rallying into the close on Friday to finish at $0.5359 per share, its high of the week – on 3.33X its average daily trading volume! GPL is rapidly building major upward momentum and picking up tremendous steam with each passing day!
In 2Q 2015, the average silver price was down by 17.74% year-over-year, with the average gold price down by 7.45% year-over-year. This didn’t stop GPL from reporting unbelievably HUGE 2Q 2015 revenue growth of 32.62%, which it achieved by reporting record quarterly silver production of 648,810 oz, up 54.48% year-over-year – as well as record quarterly gold production of 5,322 oz, up 41.05% year-over-year!
The only other US traded company to primarily produce silver and report major 2Q 2015 revenue growth is Silver Standard Resources (SSRI), which just hit a new 52-week high – the only precious metals producer to recently do so. GPL‘s 52-week high of $0.99 per share was reached one full year ago. NIA considers it a safe bet that GPL will rally to a new 52-week high of $1 before year-end 2015. However, look for GPL to soon announce its 3Q production figures – and if these numbers are strong, we could see a heavy volume move to $1+ almost immediately.
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NIA currently owns 50,000 shares of GPL. NIA intends to add to its position. Past performance is not an indicator of future returns. NIA is not an investment advisor and is not making any target prices or financial projections. Always do your own research and make your own investment decisions. NIA never recommends to buy or sell any stock. This message is not a solicitation or recommendation to buy, sell, or hold securities. Never make investment decisions based on anything NIA says. This message is meant for informational and educational purposes only and does not provide investment advice.