All else equal, something not easily said in the mining industry, the junior miners (juniors) tend to carry more leverage, or sensitivity, to the price of gold than the majors. Traders and investors, looking to reduce leverage during gold corrections and become more risk-averse, tend to sell the juniors in favor of the majors. The money flows reverse during price advances. Traders and investors, looking to increase leverage during price advances, tend to sell the majors in favor of the juniors. The junior gold miner’s to gold miner’s (majors) ratio (GDXJGDXR) illustrates the interplay between the two money flows.
In an unusual twist, the GDXJGDXR is advancing rather declining as gold corrects. This suggests increased risk-taking during gold decline. As long as this positive divergence continues, it suggests that money is flowing opposite to the headline, "strong dollar" spin.
Gold Miner's (Majors) Index (GDM):
Junior Gold Miners to Gold Miners (Majors) Ratio:
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