File photo of gold bars in the Austrian Mint.Leonhard Foeger/Reuters
Corporate insiders tend to take contrarian positions, favouring stocks that have fallen out of favour in search for value in sectors they know well. They then sell when others are aggressively buying.
But, in what could be seen as a bullish signal, that's not happening right now in the gold sector. As bullion prices have mounted an impressive rally to above $1,300 (U.S.) an ounce, insiders are buying more precious metals stocks, instead of taking profits.
The INK Gold Indicator, which measures the number of gold stocks on both the TSX and Venture exchanges with key insider buying versus those with selling, is at a year-to-date high of 395 per cent. That's nearly four stocks with key insider buying for every one with selling and up from just below 300 per cent a week ago.
Taking their cue from the commodity market, the rally this year in gold stocks has been swift. Since Christmas, the iShares S&P TSX Global Gold Index ETF has rallied about 36 per cent.
Based on capitalization, however, the move hasn't been uniform. Prices for junior miners on the Venture Exchange bottomed out last June, but senior gold stocks didn't mount a recovery until half a year later, noted Ted Dixon, CEO of INK Research.
"On the back of recent gains, some insider selling has ticked up among junior stocks, and our INK Venture Indicator's momentum has slowed down," Mr. Dixon said in a research note. "While this may foreshadow some short-term technical weakness among junior mining stocks on the Venture Exchange, the bulls are in control. Overall, positive Canadian gold mining insider sentiment remains firmly intact, with TSX players leading the buying charge."
Darcy Keith