Happy Thursday, GoldBuzzers!

Gold’s back above $4,000 after the midterms, and the gold miners had a monster day yesterday. In today’s Real Talk, I’m looking at what the election may have changed for gold, and at a clue in the mining shares that’s been building since October.

Ok. Let’s get into it. ⬇️

Gold jumped 3.3 percent to $4,064 an ounce on Wednesday, its biggest one-day gain since mid-August, and silver did even better, climbing 4.9 percent to over $52.

The trigger was the midterm elections. Democrats took both chambers of Congress, and the US dollar slid to a five-week low as investors weighed what tighter AI regulation could mean for growth.

A weaker dollar makes both metals cheaper for buyers outside the US, and that alone can move prices in a hurry. The rally came even though markets still put the odds of a December rate hike at 79 percent, with inflation proving stubborn and oil staying elevated while the US-Israeli war with Iran grinds on.

Higher rates usually work against metals that pay no interest, so Wednesday’s move says plenty about how nervous the money is. Next test: Friday’s US jobs report, the clearest clue yet on what the Fed does in December.

Check live prices and this morning’s gold and silver commentary at our sister site, GoldPrice.Live

Wednesday was the day gold owners have been waiting weeks for. Gold rose more than three percent to close back above $4,000, and silver gained nearly five percent. The miners did even better. GDX, the biggest gold mining fund, jumped nine percent, and SIL, which holds silver miners, rose almost 10 percent. By the evening, X was full of people saying the bottom was in.

What the midterms changed

The spark was Tuesday’s midterm elections. Democrats won control of both the House and the Senate, so Congress and the White House are now run by different parties. Markets took that as a sign that big new spending bills will be harder to pass and the government may need to borrow less. Treasury yields fell and the dollar slid to its lowest level in about a month.

That’s a slightly odd reason for gold to rally, since worries about government debt have been one of the big forces behind this bull market. But from day to day, gold mostly follows interest rates and the dollar. Lower yields make a metal that pays no interest more attractive, and a weaker dollar makes gold cheaper for buyers overseas.

The Fed still matters more than the election, though. Markets see roughly an 80 percent chance of a rate hike in December, and Friday’s jobs report could shift those odds either way.

A big day we’ve seen before

Mining shares usually move two or three times as far as gold, because a miner’s costs stay fairly fixed while the price of what it sells goes up and down. What caught people’s eye on Wednesday was the trading. About 41.6 million GDX shares changed hands, around twice the normal amount.

On Sunday I argued that a single loud day can’t tell you whether a fall is over. So I went through 20 years of GDX data looking for days like this one: gold at least 10 percent below its high, gold up on the day, and GDX beating it by four percentage points or more. There have been 32 since 2006, and three of them came earlier in this correction.

As you can see, none of them was the moment to pile in. After May 6, GDX slid nearly 25 percent by mid-July. June 15 was followed by another 18 percent drop. August 7 kicked off a 17 percent rally in under three weeks, but the miners gave all of it back by late October.

The longer record tells the same story. Days like this came near real turning points in early 2016, March 2020 and late 2022, when GDX gained roughly 30 to 70 percent over the next three months. They also turned up three times in 2008 and again and again from 2013 to 2015, while the miners kept falling. These are historical figures, not trading results, and on their own they don’t predict anything.

The clue that’s been building for weeks

I think the more interesting evidence isn’t Wednesday’s action at all. Last Friday (October 30), gold closed at its lowest level in a year, about $100 below its July low. What was significant was that GDX didn’t follow it down. It bottomed around nine percent above its own July low, and SIL held at roughly the same level as in July.

That’s the slow, weeks-long kind of change I said on Sunday was worth waiting for. When the miners stop falling while gold makes new lows, it often means buyers are moving into mining shares before the metal itself turns. It’s also rare. Since 2006 it’s happened clearly only four times: November 2008, September 2014, November 2015 and September 2022. Three of those came close to major lows, including the 2008 bottom I compared silver’s fall with on Tuesday. Unfortunately, the fourth, in 2014, was followed by another 32 percent drop. Four cases are far too few to call it a rule, but it’s the most encouraging thing in the data right now.

What to expect even if this is the turn

Anyone buying should also know how far prices might fall first. In the three months after any day since 2006, GDX has typically dipped about 10 percent below its starting point at some stage. After big miner days like Wednesday, the typical dip was no smaller, and drops of 20 percent or more came about three times in 10, against roughly one in five on an ordinary day.

From Wednesday’s close, a 10 percent dip would take GDX to around $76, just below where it finished on Tuesday. For gold, the typical dip has been four or five percent, which would put it back near $3,875, right on last Friday’s low.

The two signs still matter

On Tuesday I named two signs that would show the low is in. The first is silver closing above $55 and staying there, and it finished Wednesday at about $52. The second is the gold-to-silver ratio falling back toward 70, and it’s still close to 78. Neither has happened yet.

The big picture

Based on my analysis of market movements back to 1970, this consolidation phase could have ended yesterday, but it also could continue for up to 6 more months. Both of these scenarios are plausible within the context of corrections from large gains in a bull market and you can’t know definitively without the benefit of hindsight.

Wednesday gave gold a real reason to rally, with lower yields and a weaker dollar, and the miners have been holding up better than gold for weeks. That’s encouraging, but a nine percent day has fooled people three times already in this consolidation phase and for my own trading, I’ll await further confirmation from the INSIDER Min Risk signals.

I’ve had many emails over the past month from subscribers who have been making the most of these depressed prices, buying gold and silver, and locking in some excellent deals.

If you’re adding, keep buying in stages so any potential dip back toward $3,875 would work in your favor. The bull market that began in 2024 still has years to run, and when silver convincingly clears $55 and the ratio turns lower, the price itself will confirm what the miners have been hinting at since October.

That’s all for this Thursday, folks. I’ll see you on Sunday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com