Bull Market for Gold Showing no Signs of Slowing

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We want to make your investing life easier.

That’s what it comes down to for us at the Digest.

Jeff and I aim to make your investing life easier by highlighting the best ideas we see each week.

We spend our days keeping up with the markets, investing trends and specific stock picks but that’s what we get paid for. Most investors don’t have that kind of time.

Even trying to keep up can get overwhelming fast. Investors are pummeled with news reports every day. And when you’re an active investor, it’s easy to see why you can get caught up in a lot of noise.

There are hundreds of stocks in multiple different sectors and you’re supposed to make sense out of it all and develop a strategy to grow wealth.

So, we stay focused on bringing you the best ideas to help you navigate the obstacles and make your investing life easier.

Today, given this goal of bringing you our best ideas, I want to repeat a call we made earlier this year. If you didn’t get in on it before, you should take a second look now because it’s only looking better.

We’ve been noticing more bullish signs for gold.

Gold has been on an incredible winning streak since last summer. In the chart below you can see how gold turned it around in August, but really started to take off in the fourth quarter of last year.

Source: Chart courtesy of StockCharts.com

The yellow metal’s late year breakout made a lot of sense.  Gold is the traditional “safe haven” asset. It’s the place to put your money for safety when market trends start to head south. And signs late last year did not look so good.

December’s record sell-off meant a stampede of investors turning to gold, and that was on top of investors’ anxiety about whether the longest bull market in history still had legs.

We noticed the turnaround and in January, Jeff wrote a piece on the Stealth Bull Market in Gold.

Gold is now breaking out of stealth mode and you should be paying attention.

Since then, the signs pointing to more upside for gold have only gotten stronger.

Let’s review why gold has had a great couple of months and why we believe it is still looking up.

First, since the turn of the new year we’ve had a slew of data pointing to a global economic slowdown.

Recession fears are real in Germany and Italy, and China reported its slowest economic growth since the 1990s. Plus, Brexit uncertainties (chaos might be a better word) and French economic protests have left many international investors seeking safety.

When world markets are unstable, investors start buying more gold.

Well, gold and the U.S. Dollar.

Typically, gold and the Dollar move in opposite directions, but recently they are moving higher together. You can see in the chart below that even in the summer the Dollar and gold were moving in opposite directions.

Source: Chart courtesy of StockCharts.com

But in October, gold started to mirror the dollar and has since taken off.

A higher dollar is usually a headwind for gold, but it is not unheard of for them to move together, most recently in 2009-2011 during the heart of the last financial crisis.

But there are still more positive signs for gold.

The Federal Reserve has recently adopted a more dovish tone to rising interest rates, with some suggesting the idea of an interest rate cut.

Rising interest rates are bad for gold prices because interest-paying investments are much more attractive. Gold doesn’t produce any interest, so there is an opportunity cost in holding gold. But when rates stay the same or go lower, the opportunity cost declines.

The Fed’s recent signaling of keeping interest rates stable is another positive sign for gold.

And finally, central banks are still buying up gold in bunches – at the fastest rate since the end of World War II. Banks are buying for the same reasons as any investor, as a hedge against inflation and global market instability.

But that also means a decreasing supply, which drive prices higher.

And we haven’t discussed gold mining yet.

It makes sense that if gold goes up, gold mining company stock also goes up. Below you see the chart comparing the performance of the VanEck Vectors Gold Miners ETF (GDX) to the SPDR Gold Shares ETF. It’s easy to see that mining stocks are outperforming gold stocks.

Source: Chart courtesy of StockCharts.com

GDX has almost $9 billion in asset and is the largest gold mining ETF. GDX is engineered with the goal of replicating the price and yield of the NYSE Gold Miners Index. This simply means GDX gives you exposure to the performance of many of the biggest gold miners in the world.

If you are new to gold investing, you can check out our free report on 5 Stocks to Buy Now Before the Coming Bull Market. It contains some great advice about all the different ways investors can take advantage of this bull market.

If you want to track the market you can always consider following, or investing in, the gold ETFs, including GLD, or the iShares Gold Trust (IAU).

Thursday saw a decline in gold due to profit taking, and some investors interpretation of the minutes for the last Fed meeting. Basically, some gold investors believe the Fed’s position on interest rates is not dovish enough.

But these kinds of quick declines are just breathers in a longer bull market and should be treated as entry points.

Bottom line: since October gold is up about 12%, and it shows no signs of slowing yet.

We’ll continue to track this trend and keep you informed.

To a richer life,

Luis Hernandez, Managing Editor
and the research team at InvestorPlace.com

 

 


Article printed from InvestorPlace Media, https://investorplace.com/2019/02/bull-market-for-gold-showing-no-signs-of-slowing/.

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