Gold and its miners’ stocks have proven rare bastions of strength during recent weeks’ market carnage. They are powering considerably higher while nearly everything else burns. The markets’ major sentiment shift is accelerating a young gold upleg, which ought to grow much larger as speculators and investors continue returning. Their collective gold positioning remains very low, making for abundant gold upleg fuel.

October’s outperformance by gold and gold stocks has been impressive. As of Wednesday, the flagship US S&P 500 broad-market stock index had plunged 8.8% month-to-date. That heavy selling was led by the market-darling mega tech stocks, pummeling the Nasdaq down 11.7% MTD! Stock investors are starting to pay the piper for getting far too complacent in bubble-valued markets, the reckoning is underway.

But contrarians prudently positioned in gold and its miners’ stocks have enjoyed large divergent gains as flight capital floods in. Gold has surged 3.4% MTD despite the US Dollar Index’s strong 1.3% rally. The long-forsaken gold stocks have nicely amplified those gains, refusing to get sucked into the maelstrom of heavy stock-market selling. The leading HUI gold-stock index has blasted 8.2% higher MTD, 2.4x gold’s upside!

While mid-October’s stock-market plunge out of the blue jumpstarted gold, its young upleg was already stealthily underway. Gold bottomed at $1174 in mid-August after getting pummeled by all-time record gold-futures short selling by speculators. It quickly rebounded as high as $1210 in late August but drifted back down as low as $1183 in late September. This anemic gold upleg was already 7+ weeks old in mid-October.

Though gold didn’t respond much the first day the S&P 500 plunged 3.3%, the next day’s 2.1% follow-on selling galvanized gold interest. It rocketed from $1194 to $1223 that day, a huge 2.5% rally that made for its biggest up day since late June 2016’s surprise pro-Brexit vote in the UK! Those massive gold gains propelled the HUI a huge 7.4% higher that day. The capital was deluging back into this moribund contrarian sector.

While the gold and gold-stock gains in recent weeks were impressive, they remain quite small. From their respective mid-August and early-September lows, gold and the HUI were only up 5.0% and 13.9% as of the middle of this week. That’s hardly even upleg territory, a mere start. Gold’s last major upleg unfolded in roughly the first half of 2016. While it was on the smaller side by historical standards, it offers perspective.

Gold surged 29.9% higher in just 6.7 months, catapulting the major gold stocks as measured by the HUI 182.2% higher in largely that same span! So what we’ve seen in recent weeks is nothing compared to the last major gold upleg, let alone far-bigger previous ones. Today’s young gold upleg is only getting started. And with gold upleg fuel still abounding, odds are it and the resulting gold-stock upleg will grow much larger.

Gold bull-market uplegs usually unfold in the same telescoping fashion. They are initially ignited by gold-futures speculators covering shorts. These traders are usually the only buyers at major lows following corrections when sentiment is hyper-bearish. They buy offsetting gold-futures long contracts to close out their existing short contracts at profits. This short covering is the spark that first kindles major gold uplegs.

That short covering soon burns itself out, as short-side traders have relatively-little capital compared to the other gold buyers. But it often propels gold high enough for long enough to entice long-side gold-futures speculators to return. They command much more capital than the shorts, and their buying soon becomes self-feeding. The more gold-futures contracts they buy, the more their peers start chasing that momentum.

That long-buying second stage eventually evokes gold uplegs’ third stage, the primary one and largest by far. All the gold-futures buying extends gold’s rally enough to get investors interested in returning. They control vastly more capital than futures speculators, so once they start buying gold is off to the races in a major new upleg. Unlike short-lived gold-futures buying, gold investment buying can run for many months on end.

Stage-one gold-futures short covering is the initial trigger that ignites stage-two gold-futures long buying. And all that futures buying together eventually jumpstarts stage-three investment buying. As investors start to return to gold in a material way, gold’s upleg accelerates in a self-sustaining virtuous circle. The more capital investors pour into gold, the more it rallies. The more gold climbs, the more investors want to buy.

Today’s young gold upleg is starting to follow that usual three-stage pattern of fueling buying. And since vast amounts of gold-futures short covering, gold-futures long buying, and investment buying still remain based on current positions, this gold upleg is likely to power way higher before it eventually gives up its ghost. Gold looks exceptionally bullish today with upleg fuel abounding, portending much bigger gains to come.

What gold-futures speculators and gold investors are actually doing and likely to do in coming months is discernable from two key datasets. The first is the weekly Commitments of Traders reports published by the CFTC, which detail speculators’ collective positions in gold futures on a weekly basis. The second is the physical gold bullion held in trust by the leading and dominant American GLD SPDR Gold Shares gold ETF.

We’ll start on the gold-futures side, as that’s where gold uplegs’ stage-one and stage-two buying comes from. This chart shows large and small speculators’ total long and short gold-futures contracts held, in greed and red respectively. Gold is superimposed over the top in blue. Despite gold’s sharp rally when the S&P 500 plunged, the great majority of likely gold-futures buying is still yet to come which is really bullish.