Two Signs the Gold Bull Market Is Back
Gold breaks out... After six years, new highs are finally here... Two signs the gold bull market is back... A second chance to see Doc's trading 'master class'...
Back in February, we noted two bullish signs for the gold market...
First, despite a rising U.S. dollar, gold was quickly closing in on multiyear highs. Second, and perhaps more important, gold-mining stocks were suddenly outperforming the precious metal itself for the first time in several years. As we explained in the February 20 Digest...
As longtime readers know, comparing the performance of gold stocks to gold itself – through the so-called "gold stocks to gold ratio" – can be valuable.
Because gold stocks provide leverage to the price of gold, they tend to rise much faster than gold during bull markets... and fall much faster than gold during bear markets. So if this were the start of a new uptrend in gold, we would expect to see this ratio moving sharply higher.
As you can see in the following chart, that's exactly what has happened...
Since making a new multiyear low last fall, this ratio has moved sharply higher. And it is now just shy of making its first "higher high" in nearly three years.
As we mentioned at the time, this was a big deal...
We hadn't seen a similar move since early 2016, just before gold and gold stocks soared. More from that Digest...
Over the next several months, gold rallied almost 25%, while gold stocks – as tracked by the VanEck Vectors Gold Miners Fund (GDX) – surged nearly 140%.
After the big rally over the past few months, we wouldn't be surprised to see gold take a "breather" soon. But it's looking more and more likely that a new gold bull market is already underway.
Gold has stuck to this 'script' so far...
Prices peaked at $1,347 an ounce that same day and trended lower through early May.
But this month, gold exploded to the upside. And as we noted a little more than a week ago, gold was once again threatening to break out to a new multiyear high. Here's the chart we showed you in the June 12 Digest...
Yesterday, it finally happened...
As you can see in the updated chart below, gold has now officially broken out to a new six-year high...
And as you can see in the next chart, the gold stocks to gold ratio has finally made a "higher high" as well...
As always, we'll remind you there are no guarantees in the markets.
But these charts paint an incredibly bullish picture for gold. And as we noted last week, if it can close solidly above $1,400 an ounce, gold could rally several hundred dollars higher in a hurry.
Of course, technical analysis – or 'chart reading' – isn't the only reason to be bullish on gold today...
For the first time in years, we also have a strong fundamental reason as well.
Earlier this week, we noted that the Federal Reserve is now expected to begin cutting interest rates this year. In fact, futures markets are now pricing in a 100% chance of the first cut by July... an 80% chance of a second cut in September... and a 41% chance of a third cut in December.
But as our colleagues Ben Morris and Drew McConnell noted to their DailyWealth Trader subscribers yesterday, the Fed is not alone...
[On Wednesday], the U.S. Federal Reserve followed in the footsteps of the European Central Bank. Then [Thursday morning], the Bank of Japan did the same.
The developed world's three largest central banks all suggested that monetary stimulus is on the way... and probably soon. The details of what these banks choose to do isn't the point.
The point is that now, without question, the tone has changed... The "world economies are improving" commentary is gone. The "headwinds are blowing" commentary is here.
On top of that, the U.S. government is blaming Iran for bombing Japanese oil tankers and Iran's Revolutionary Guard just shot down a U.S. drone. Geopolitical tension is rising.
In short, the 'pause' of the past couple of years appears to be over...
The world's big central banks are all preparing to flood the world with "easy money" once again.
Add in rising geopolitical tensions, and you have a recipe for an explosive move higher in gold. More from Ben and Drew...
Governments around the world are standing at the line, ready to get back into the race to devalue their currencies. So once again, gold and silver look attractive as a form of savings compared with paper currencies.
Precious metals also tend to perform well when geopolitical tensions rise, which is why we mentioned the news about Iran above.
Now, we're seeing these ideas in action...
If you haven't followed our advice to accumulate physical gold and silver over the years, maybe this is the sign you were looking for. If you don't hold at least 5%-10% of your wealth in precious metals, start buying today.
New 52-week highs (as of 6/20/19): Automatic Data Processing (ADP), American Express (AXP), Blackstone (BX), Blackstone Mortgage Trust (BXMT), Sprott Physical Gold and Silver Trust (CEF), Celgene (CELG), Dollar General (DG), Disney (DIS), Equity Commonwealth (EQC), Essex Property Trust (ESS), Franco-Nevada (FNV), General Mills (GIS), SPDR Gold Shares (GLD), Barrick Gold (GOLD), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Ingersoll Rand (IR), Kirkland Lake Gold (KL), Coca-Cola (KO), Lockheed Martin (LMT), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), Lundin Gold (TSX: LUG), Microsoft (MSFT), Motorola Solutions (MSI), NovaGold Resources (NG), Nestlé (NSRGY), PepsiCo (PEP), Procter & Gamble (PG), Polymetal (LSE: POLY), Royal Gold (RGLD), ResMed (RMD), Starbucks (SBUX), Travelers (TRV), Vanguard Inflation-Protected Securities Fund (VIPSX), Vanguard Real Estate Fund (VNQ), Vanguard S&P 500 Fund (VOO), Wells Fargo – Series W (WFC-PW), W.R. Berkley (WRB), and Aqua America (WTR).
A slow day in the mailbag: One reader sends kudos for Doc Eifrig's Advanced Options service, while two others request a second chance to watch Wednesday's trading "master class." What's on your mind? Let us know at feedback@stansberryresearch.com.
"So far Doc has won 9 out of 13 [Advanced Options trades], which is sensational in this crazy volatile options market. I've used lots of trading services thru the years, but NOBODY educates and takes care of his customers like Doc!
"His knowledge and experience are simply outstanding, and so far we are in the black and moving forward. PLEASE let Doc know that I am immensely impressed by his knowledge and his commitment to his customers, and let Porter know that He should be ultra pleased to have Doc on his team!" – Paid-up subscriber Curt F.
"The company where I work blocked access to your site. I [was not able] to view the master class. Will this be available any other [time]?" – Paid-up subscriber Jay S.
"I was all ready to see Doc's seminar [Wednesday] night until suddenly at 5 minutes before 8 PM our power went out due to thunderstorms. It didn't come back on until midnight. Is it possible to see a rerun of the video?" – Paid-up subscriber Al V.
Brill comment: No worries, gentlemen... You can watch a full replay of Doc's educational event right here.
Regards,
Justin Brill
Baltimore, Maryland
June 21, 2019