Can Miners Really Fall in the Election Year?

Can anything really fall during the U.S. presidential election year? Will the markets be “allowed” to fall?

Fortunately, this is not the first presidential year, so we have data to analyze. Quoting the details from our Explanations section:

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Details: average annual return of S&P (1948-2015, green line), gold (London P.M. Fix, 1972-2015, yellow line), silver (London Fix, 1972-2015, blue line), XAU Index (1984-2015, purple line) and HUI Index (1997-2015, red line) in presidential election cycles.

The election year is marked with 4. Based on the data, the current – election – year is the weakest year for silver and mining stocks, while being relatively good for gold and very good for stocks.

Can stocks slide before the elections? Sure. The above is just a tendency and not a law or rule. In the dataset used to calculate stocks’ performance, there was no year that was so similar to 1929 as the current one.

And since world stocks appear to be topping here, it could be the case that the U.S. stocks can follow other stock markets lower.

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The S&P 500 rallied yesterday, stopping at the rising resistance line based on the previous highs. The previous attempt to break above 5,300 was quickly invalidated, so perhaps the same thing is likely also this time.

The key thing is not what stocks did, but how little junior miners moved higher despite that – especially that gold rallied as well.

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Gold continued its back-and-forth pattern, while SLV and GDXJ both verified their previous breakdowns. In the case of the SLV, it was a comeback to the late-May low, and in case of the GDXJ, it was the comeback to the previously broken rising support line.

Taking last two days into account, gold is higher, stocks are much higher, and yet, silver and junior miners are down visibly.

This is a strong suggestion that the declines in the miners and silver are likely to continue. The slide in gold is also likely to start any day now (and comments from yesterday’s Gold Trading Alert on the buy targets for gold remain up-to-date).

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief