This 8-page update covers the short-term and medium term outlook for the precious metals sector.
We discuss targets for Gold, Silver and the gold stock indices as well as current sentiment readings in Gold and Silver.
We also comment on Bonds and their short-term outlook as well as the outlook beyond that.
Finally, we mention our top silver stocks which we don’t currently own.
Dr. Jeffrey M. Kern has been an academic clinical psychologist at Texas A&M University and the University of Nevada – Las Vegas since 1979, specializing in the measurement and prediction of human behavior.
Born in New York City, Dr. Kern’s family suffered severe financial losses during the stock market decline of the mid-1970s and his small childhood savings were then ravaged by the inflation of the late 1970s, spurring him to spend years researching the prediction of the gold market. His subsequent 22 years of experience in trading the precious metals have been guided by his most profound discovery, the SKI indices.
Although he has received various professional awards, including being named the 1998 Nevada Psychologist of the Year and serving as the Director of two doctoral programs in Clinical Psychology, his unique mathematical accomplishments in predicting the gold market have not, as yet, been recognized by the mainstream financial media or the societies for technical analysis. Dr. Kern’s most prominent assets are his wife of 30 years (Lisa) and his two sons (Joshua and Douglas).
Prediction is the essence of science, and although financial publications regularly dismiss the possibility of predicting market movements, Dr. Kern’s ambition is to indisputably demonstrate the fallacy of such assertions. The ability to predict human behavior, evaluated via the objective and error-free measures of daily financial markets, is his intellectual and personal passion.
He invites you to join him in his profitable, scientific, and personal journey.
Jeff’s Website, Subscription Information & Contact Info
SKI Gold Stocks
Jeff’s Free Commentary Archive
Gold has been on the cusp of a major breakout but someone forgot to tell the gold stocks. Gold is right back at resistance levels yet the various gold stock indices are off their September 2017 highs by 11% to 16%. The relative weakness in the gold stocks (and Silver) is a signal that Gold is unlikely to breakout now. In fact, if Gold were to correct here the gold stocks could threaten support and perhaps make new lows. While that sounds quite bearish, history shows that a break to new lows in gold stocks would be a massive buy signal.
The history we refer to is the path of recovery for a market following a mega-bear, which we define as nearly 3 years and at least an 80% decline. There are three strong historical examples. Those are the S&P 500 during the Great Depression, Thailand after its bust in the mid to late 90s and the housing stocks after 2005 to the March 2009 low. The recovery in each (following the mega-bear) followed three distinct phases. There is a sharp initial rebound which is followed by a correction and lengthy consolidation which lasts at least 18 months. Eventually, the long consolidation ends and the market surges higher in an impulsive fashion.
The gold stocks are currently in the 19th month of their correction and consolidation. They bounced from support in December but retraced that entire bounce. After a second rebound from support, they could threaten a break of that support. Below we show the HUI Gold Bugs Index which does not include the royalty companies as GDX does. The HUI is not too far from its December 2016 low and could even break it if Gold were to correct.
Conventional technical analysis would imply that is a sell signal for the gold stocks.
But history argues the complete opposite.
In the 21st month of its correction and consolidation in 1935, the S&P 500 had broken down to a 2-year low. Was the market headed for a retest of the Great Depression low?
In the 19th month of its consolidation in the fall of 2011, housing stocks had broken to a 2-year low. Was the sector headed for a retest of the Global Financial Crisis low?
Thailand’s correction and consolidation phase was different than the others as it made its low only 15 months in but then consolidated and grinded slightly higher for the next 13 months before exploding to the upside. At its corrective price low 15 months in the index was at a 2-year low.
The HUI closed Friday just below 185. Its December 2016 low is 163.49. A 12% decline would put it below its December 2016 low and at a 2-year low.
The three historical examples all made 2-year lows before their correction and consolidation phase ended.
A potential failed breakout or correction in Gold could leave gold stocks vulnerable to a decline to new lows. While that sounds bearish, the historical context …read more
TheDailyGold Premium #557 was published and emailed to subscribers late Saturday evening.
The 25-page update included our near-term posture on the sector, a lengthy Q&A section (in which we answer subscriber questions) and an updated report on one of our favorite companies. We think this company could be a 4-5 bagger in the next 18-24 months.
With gold and gold stocks rebounding this week Jordan Roy-Byrne, Founder and Editor of TheDailyGold.com shares some nuances that he is watching. He points to the HUI gold bugs index that last week closed at a 14 month low. Combining this with gold up against the dollar but not against US stocks or foreign currencies he really wants to see some more real strength in the metal.
Gold has rallied back close to trendline resistance. Will it push through this time? That will depend on if Gold can breakout in real terms (against stocks, currencies) as its strength over the past year as been driven by only US$ weakness.
The 10-page flash update was published and emailed to subscribers late Wednesday evening.
We provide an update of two of our companies that popped nearly 20% and comment on the sector action.
It was a rough week for investors in stocks and stocks of all kinds. The S&P 500 lost 5%. Emerging Markets also lost 5%. Gold Stocks, which had weakened before the broader equity market have been hit hard. They (GDX, GDXJ) also lost 5% last week. The HUI Gold Bugs Index (which excludes royalty companies unlike GDX) lost 7%. After a strong start to the year, gold stocks have essentially given back all their gains. Nevertheless, we remain extremely optimistic on gold stocks over the next 12-18 months as trends in the economy and stock market should begin to support Gold after the second quarter.
Historically speaking some of the best performance in Gold and gold stocks occurred during or after a bear market in stocks. The best examples can be found in the 1970s and 2000s as the charts show. Gold surged after the bottom in stocks in 1970 and continued to perform very well during the 1973-1974 bear market. After a brief but sharp bear in 1975-1976 Gold rebounded strongly as the S&P 500 began a mild bear market in 1977. Years later Gold emerged from a significant bottom in 2001 while the stock market endured its worst bear market in a quarter century. Gold continued to perform even after the market bottom in late 2002. Gold emerged from the global financial crisis before the stock market but continued to make new highs after the stock market bottomed in March 2009.
This performance is not just random. It makes quite a bit of fundamental sense. As we know, Gold is driven by falling or negative real rates. Typically policy makers in response to a recession or bear market will pursue policies that lead to falling or negative real rates. These policies are not reversed until the economy gains strength. Gold can also benefit from inflationary recessions, which we saw in the 1970s. Perhaps we are headed for that outcome at somepoint but I digress.
The best comparison to today may be the mid 1960s. Although the Gold price was fixed until 1971, we can use gold stocks to study the macro picture of the 1960s and how it may relate to today.
Gold stocks and the stock market were positively correlated during the 1960s but gold stocks dramatically outperformed and especially from 1964 to 1968. That outperformance accelerated after 1963 as inflation and bond yields began to rise to higher and higher levels in the years ahead. That would soon negatively impact the stock market in both nominal and real terms. The Dow peaked in 1966 while the S&P 500 did not peak until 1973 (as it made marginal new highs in 1969 and 1973). In real terms stocks would peak in 1966 or 1968 (depending on which index you use).
Economic fundamentals appear to be headed in a direction that is bullish for Gold and gold stocks and less positive for the stock market. While inflation has yet to be unleashed, …read more
Saturday evening we published an action-packed 25 page update, TDG #556.
The update included several pages of how this market and economy could compare to the past and what needs to happen for precious metals to begin to benefit.
We also included updated buy targets on a list of 12 companies. We noted the enterprise values on a handful of these companies. Those could rise 3-5x if Gold breaks above resistance and ultimately reaches $1650-$1700.
After the recent big couple days down in the US markets there is a possibility that the gold to US stocks ratio is turning. Jordan Roy-Byrne and I look at both gold and US stocks and the drivers for each throughout this year. For a long-term investor if this ratio was to revert in favor of gold this would be a crucial turning point.
I talked with Jordan Roy-Byrne of TheDailyGold.com to get his take on gold investing in 2018 in the face of the wild swings we have seen in the stock market over the past three days. We saw the DOW go down over 1,000 points and luckily come back Tuesday. But gold has hung in there while gold stocks have dipped. Why? I wanted to see what Jordan’s thoughts are now on these market action.
Early Sunday we published the 26-page premium update and emailed to subscribers.
The update focuses on the key support and buy targets for our model portfolio positions.
The 12-18 month outlook for precious metals remains very bullish but it will take the sector some time to get in position for the major breakout. In the meantime we have to accumulate weakness and identify the stocks with value and explosive potential when the sector does breakout and run.