Confidence vote: Insiders are picking up the precious metal stocks others are dumping

A Canadian financial research firm says the insider buying ratio on the Toronto Stock Exchange has nearly doubled since mid-January.

Gold mining executives are showing confidence the sector is on the upswing, even as other investors leave the TSX Global Gold Index and the TSX Venture Exchange in droves.

Ontario's INK Research told the Globe and Mail Monday that the current level of transactions is very lopsided and typically only seen during major highs or deep lows in the market — for every precious metals stock insiders are selling there are seven stocks showing high levels of insider buying.

The situation with gold and silver miners now, according to INK Research, is similar to what happened in the broad market during the height of the 2008-2009 financial crisis.

While gold prices are down, the underlying macroeconomics haven't altered much, it said. The threat of eventual inflation remains even though central banks are working to keep interest rates low.

The research firm believes miners have some favourable emerging factors, despite gold stocks underperforming the bullion market recently.

Big mining companies have let go of CEOs who have decreased shareholders' value signalling a more cautious approach. Market technicals — like US gold companies on the NYSE Arch Gold Bugs index hitting the lowest levels versus the physical metal prices of the SPDR Gold ETF since 2008 — suggest gold stocks are cheap compared to gold.

With fundamental and technical conditions supporting heavy insder buying, INK Research said it looks like a significant bottom in precious metals mining shares may be in the process of forming.

Image: Andyhill8 via Wikimedia Commons