Amid all the market chaos of the past several months, there’s one vehicle that has developed a remarkably orderly, and classically bullish pattern. It’s not an investment that we normally think of as orderly. In fact, you may not think of it as an investment at all. Some Wall Street pros ignore it. Some recommend it only as a hedge against catastrophe, although I’m not sure that idea holds water.
By now you have probably guessed what it is. It’s the real money of the ancients, the shiny yellow metal, that many, perhaps even you, still believe is the only real money. Of course, it’s gold.
Attention Retirees: Get ready for January 2019
The largest Social Security increase in seven years is set to take effect in the New Year, and beneficiaries can expect up to an extra $73 per month. But one error has rendered a group of beneficiaries grossly underpaid… and when you compare a $73 bump to the $23,441 sum tens of thousands of American seniors are rightfully owed, that increase doesn’t sound so significant. If you’re over 50 and receiving Social Security, this money could be legally yours. Here’s the full story…
Now I doubt that gold has any monetary purpose for us as individuals any more. Clearly central banks think it does because they hold tons of that stuff in their vaults and some central banks have been on programs to acquire more of the stuff. But you and I can not now, nor is it likely that we’ll ever be able to exchange it directly for goods or services.
There Are Several Ways To Buy Gold
We could buy it and store it, and sell it later in exchange for conventional money. However, unless you are dealing in very large amounts, the spreads between bid prices and ask prices for the physical stuff can eat up most of whatever profit you might gain in the short run.
Given the drawbacks associated with holding physical gold, you could hold “paper gold” in the form of a mainstream gold ETF such as GLD, although many gold “bugs” will tell you to beware, that the ETFs don’t hold enough of the real stuff to guarantee backing. For trading purposes, I think the ETFs are about as risky as any other investment. “We pays our money and takes our chances,” as the saying goes.
If you’re a real high roller, you may even be keen to trade the gold futures. But look out if they go against you. The leverage can wipe out more than your investment in a few hours.
The time to invest in defense is now (2019 could be historic)
Safeguarding America’s sovereignty and security weighs in at a hefty price – and the Department of Defense is notorious for exceeding its budget. Right now, the bidding is set at $597.1 billion for 2019 – and we’re expecting this one tiny company to soar…
Finally, there are the gold mining stocks. They can give you a piece of the action in the gold price, but they often lag and even go against the trend for significant periods. It can be very frustrating. Some miners are better than others of course.
And in the long run, while gold trends higher with inflation, it has had very lengthy bear markets on the way up, which makes timing critical. If you buy near a top, you can wait decades to break even.
For practical purposes, I think that the gold stocks need to be traded on their own merits. Now, I know nothing about the fundamentals of these operations, or of the metal, which has limited industrial and consumer uses that have little to do with its price. I think that both the metal and the mining stocks need to be traded on the merits of their charts.
For me, gold is a trade. There are times that it can be a very long term trade, and other times, just an intermediate swing trade.
Click to enlarge
Most cycle and momentum indicators look good for a continuation of the upmove.
These Charts Shows That the Longer View Also Has Bullish Features
The longer term, weekly chart also looks bullish. It faces rising trend resistance around 1290-1300 in the near term. If it clears that line, it faces a second rising trendline about $25 above.
The long term cycle indicator is bullish, and so are the 18 month and 9 month cycle indicators. The 4 year cycle indicators are in a holding pattern. The smooth solid line is the cycle oscillator. It says that the cycle is in a down phase. But the lighter, jagged line, which represents momentum, has been in a holding pattern during this period. That can persist for months. The fact that it’s holding near neutral is potentially very bullish, if it continues to hold through the down phase. For now, it’s a tossup.
Click to enlarge
The monthly chart gives us a very long term perspective. The 4 year cycle condition on this chart is ambiguous. It’s possible that the September 2018 low was a delayed bottom for this cycle. It appears that there’s room to run to 1369 over the next several months. That would be a reasonable target for the current 18 month cycle up phase.
Click to enlarge
The long term outlook should be decided over the next few months. If the market clears 1300, 1369 will be a reasonable target. From there, the longer the price hangs around that level, the greater the chances of a breakout and a move back toward the 2010 highs around 1900, and possibly higher.
If the bullish outlook holds up, the mining stocks could be an interesting way to claim your stake in a gold rush. We’ll look at those in an upcoming report.
Happy New Year!