Wednesday , 13 December 2017


Keep the Faith – This Bull Market in Gold STILL Promises to Be One for the History Books! Here’s Why

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Seeing the S&P 500 outperform gold and seeing gold stocks get decimated…has been enough to create suicidal sentiment…in the precious metals (PM) sector…but, as the many calls for an end of the PM bull market…[are expressed,] the risk in the PM sector gets lower and lower. The bigger picture hasn’t changed and isn’t going to for some time [so] keep the faith and hold onto your PM sector items tight. Don’t let the short and intermediate-term noise distract you from what STILL promises to be a secular bull market for the history books. The Dow to Gold ratio will hit 2 and might even go below 1 this cycle. [Let me explain.] Words: 873

So writes Adam Brochert (http://goldversuspaper.blogspot.com) in edited excerpts from his article* entitled 2013 – The Year of the Gold Bull?.

 This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Brochert goes on to say, in further edited excerpts:

The bigger picture hasn’t changed and isn’t going to for some time: a major private sector secular economic contraction in the West being fought with manufactured money/credit units by governments and central bankstaz. This is not a period to favor paper, as reflected by common stocks, over gold. My trade of the year for 2013 is the same as my favored trade back in August: go long the “Gold to Dow” ratio (or short the “Dow to Gold” ratio).

The S&P 500:Gold Ratio

The secular chart of the S&P 500 (a broader index) to Gold ratio shows that time has run out for the paperbugs on this correction [go to StockCharts.com for an updated version of the chart below]:

[While] such a ratio chart doesn’t tell us anything about nominal prices of either of these items, it does tell us that a shiny piece of metal, with no dividends or growth prospects, should continue to trounce the wizards of Wall Street over the next several years. This is the forest one does not want to lose sight of the next time Warren Buffett talks about how perplexed he is by gold. Perhaps Warren should have listened to his father, Howard (a congressman), a little more:

“I warn you that politicians of both parties will oppose the restoration of gold, although they may outwardly seemingly favor it, unless you are willing to surrender your children and your country to galloping inflation, war and slavery then this cause demands your support. For if human liberty is to survive in America, we must win the battle to restore honest money.”

Now, I am not interested in politics, as I fully expect politicians to play their role and do the exact opposite of the right thing regardless of which party or platform they claim to represent. I also don’t believe that a gold standard can fix the world’s problems, as governments controlling money is the problem, not the form of monetary system governments foist upon the masses. In most countries in the world currently, one is free to save in gold rather than paper currency, which is the important thing for pragmatists like myself but if one uses history as a guide, I think Howard Buffett was closer to the mark than his son Warren.

In any case, gold will win over Warren and his paperbug minions this cycle because it is simply the time for this to occur. Cycles in markets exist much like cycles in nature, as financial markets are but a manifestation of the thoughts and emotions of one of nature’s more curious species. We are in a secular fear and uncertainty cycle for conventional financial assets, which benefits gold.

Gold

Moving from the philosophical to the tactical, now is the time to be bullish on gold and its derivatives, not bearish. The intermediate term correction from the fall 2012 highs in the PM sector was much longer and deeper than I thought it would be, but we are where we are now. Keeping a healthy perspective on the intermediate term, the current set up is much more likely to lead to a bullish outcome than a bearish one. Here’s a 12 year weekly chart of gold [go to StockCharts.com for an updated version of the chart below] to show you what I mean:

The Explorer/Small Cap Mining Sector

The beleaguered gold stock sector is also oversold and significantly undervalued for the 3rd time in the past year….Using the GLDX ETF as a proxy for the explorer/small cap gold mining sector, here is the weekly price action over the past few years  [go to StockCharts.com for an updated version of the chart below]:

Conclusion

I remain wildly bullish on the whole PM sector. Cycles in markets exist much like cycles in nature, as financial markets are but a manifestation of the thoughts and emotions of one of nature’s more curious species. We are in a secular fear and uncertainty cycle for conventional financial assets, which benefits gold. Keep the faith and hold onto your PM sector items tight. Don’t let the short and   intermediate-term noise distract you from what still promises to be a secular   bull market for the history books. The Dow to Gold ratio will hit 2 (and we may well go below 1 this cycle).

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://goldversuspaper.blogspot.ca/2013/01/2013-year-of-gold-bull.html (If you would like some assistance navigating the PM sector with an orientation towards trading the intermediate-term swings, I publish a low   cost subscription trading service that is only $15/month. Adam Brochert – abrochert@yahoo.com)

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One comment

  1. Those that seek long term profits need not be concerned when PM’s value moves about, since the long term charts tell the true picture, which is one of steady growth over time, My advice is stay focused on the long term and don’t sweat the short term oscillations!