From Collin Kettell: Precious metals expert Jordan Roy-Byrne discusses his latest research where he found some interesting similarities with gold stocks compared to historical three-year bear markets.
He found three that compare well; they are the S&P 500 during the great depression, the housing market during the global financial crisis, and Thailand in the mid-1990’s which had a huge bust. He describes how all of the recoveries afterward seem to follow a specific pattern and he sees that behavior in gold stocks. Those patterns ended after 14-24 months with prices moving upwards by 133% to 200%.
Based on this history he thinks the next move leg higher will probably begin sometime in the second or third quarter of next year. What convinced him is the rarity of long-term bear markets, and these recoveries seem to follow very distinct patterns.
Gold in real terms has been pretty weak and lagging even though the dollar has been underperforming. Gold was not able to make a new high even with base metals doing well. This has not been a good year for gold, it’s just been a dollar bear market. Precious metals have been weak relative to other currencies and assets. There is still a lot of relative weakness in the sector, and there is a definite risk of lower prices in the days and weeks ahead. The cryptocurrencies and the stock market may be factors on why gold is being neglected. The Fed hike in December is priced in, and there may be another in March. He feels that investors should start getting ready for the buying opportunities.
Jordan discusses the stock to gold ratio and how it has broken out higher. He thinks this outperformance of the stock market will continue. We are going to have to be patient for a little while longer.
The SPDR Gold Trust ETF (GLD) closed at $121.59 on Friday, up $0.49 (+0.40%). Year-to-date, GLD has gained 10.93%, versus a 19.40% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Palisade Research.