Nick Hodge,
Publisher
Aug. 30, 2024
Gold remains near all-time record high prices north of $2,500 per ounce.
It is up 30% over the past year.
And it is now beating the S&P, which itself has hit multiple record highs of late, year-to-date.
You know that central banks, including China’s, have been buying record amounts of gold the past few years.
That has been the primary driver. Costco may have helped a little.
And these record-high gold prices came amid higher interest rates, with the yield on the two-year US bond above 4% — and at times above 5% — for the past two years.
Record gold prices also came amid a relatively strong dollar, with the US Dollar Index well above 100 for most of the past two years — and as high as 114 at one point.
Both those things are now reversing.
Rates are coming down as economic growth slows and we approach a September US rate cut with a 100% likelihood being priced into the market.
The dollar is coming down for largely the same return-of-easier-money conditions coupled with slower economic growth.
What’s more, two years ago, when the world’s central bank managers were asked what portion of their reserves would be held in gold in the next five years, less than half (46%) said “moderately higher.” When asked the same question this year, 66% of the same central bankers said they expected to be holding more gold in the next five years.
You also have the effect of money managers rolling off their beaches and boats and back to their boardrooms as September approaches. And they, too, are going to want an increased allocation of gold given the events of recent weeks and the rate cuts ahead.
So don’t be surprised if you wake up with gold closer to $2,600 in the next few weeks.
At the same time, gold stocks have still failed to deliver the leverage to gold that most investors expect. There are a lot of ways to twist the chart, but I just pressed the five-year button to compare gold against VanEck Gold Miners ETF.
You can see the leverage — both to the downside and upside — that gold stocks provided in 2020 and even in 2022.
Since then, gold stocks as a whole have underperformed their golden counterpart.
There are many reasons for that. And I’ll be diving into them over the next few weeks.
But for now, let me just say there have definitely been some big wins already as this gold bull starts to unfold.
You’ve just had to do some actual work to find them.
Here at Resource Stock Digest, Gerardo brings you the stories of companies who pay to be featured.
You may also know that he runs a monthly junior mining investment newsletter where he writes about companies that cannot pay to be featured. He has to have done the work on the name and they have to meet his criteria for personal investment.
It’s called Junior Resource Monthly, and for the past few months he has been using this stock as the basis for a new report to attract readers to that letter. Check out how it has performed this year relative to the same GDX ETF mentioned above:
It has outperformed a broader basket of gold stocks more than six times over.
And it has been fun to watch the number go up in my account.
So there are gold stocks showing the leverage to gold that they’re known for.
You just have to know where to look.
It’s easy when Gerardo shows you.
Call it like you see it,
Nick Hodge
Publisher, Resource Stock Digest