Zenolytics Flashback 2018: Making The Case For Gold
Coming into 2020, one of the two events that I had taking place during the year was gold going parabolic. Now that gold is getting there in terms of a parabolic move, it's a good time to flashback to late 2018, when the idea of gold as a long-term investment was presented here in an extensive write-up detailing all of the ways gold could go right in the years ahead. Here is a small excerpt from that note. The link to the full research is at the bottom of the page: Apart from an abundance of data showing that both gold and even more so, gold miners, are absurdly cheap. There is anecdotal data such as the fact that Vanguard recently changed their metals and mining fund name to the “Global Capital Cycles Funds,” taking down exposure to miners to just 25% of the fund from 80%. This leaves Vanguard investors, which, by the way is the largest mutual fund company in the world, with no way to participate in the advance of gold or gold miners. As an aside, the last time Vanguard made a similar move was in 2001, before the secular bull trend in gold started from $300. Needless to say, Vanguard follows demand by its investors. Investors have abandoned the sector, creating a highly asymmetric opportunity. As is usually the case, investors tend to follow each other blindly over the proverbial cliff, without doing much in the way of thinking about liquidating asset classes that are either overwhelmingly in favor or taking positions in sectors that are overwhelmingly out of favor. This leads to vast discrepancies between price and actual value during periods of exuberant enthusiasm and despondent pessimism. The job of the investor is to capitalize on these discrepancies, which is often times an exercise in absolute isolation. The act of buying into despondent pessimism is extremely difficult because you are effectively alone in your opinion, without evidence, other than your own, to substantiate a thesis. For a majority of investors, this is an extremely uncomfortable place. Others tend to thrive, seeking only situations where few other investors are present. T11's strategy dwells heavily in the latter discipline. Gold falls right into the classification of an extremely uncomfortable place where few other investors are present. It doesn't simply stop at gold being a sentiment and value driven play. There are events unfolding in the geopolitical and macroeconomic landscape that leave very few scenarios where gold doesn't appreciate in value: 1. The Fed stops raising rates = dollar bearish/inflationary ramifications/bullish for gold 2. The Fed continues raising rates = substantially...
Character Shifts Of The Jubilant Type
When commodities develop a bid over a period of many months that bid doesn't simply dissolve into a puddle and go away. The technically driven nature of commodities, in particular, gives weight to price moves that develop structure. The structure of the move reinforces the price trend over the long-term. This is exactly why the price trend developing in gold and silver should be taken seriously by investors. While it is by no means a guarantee, there is growing evidence from both a technical and fundamental view that we are still very early within a secular uptrend in metals that could last years. Fundamentally, the most obvious issue is with the perpetual nature of QE that has become a religion among the central banking crowd in the U.S., Europe and Japan. The deficits that are being generated are a guarantee of future currency debasement. Further, the role of central banks within the economy seems to be changing from an opponent of inflationary economics to a proponent of inflationary economics. This is a massive fundamental shift in the function of the Fed as a defensive weapon to what is now an offensive weapon for the economy. There is no possible means of the Fed being offensive without sacrificing their balance sheet and thus, the currency. Technically, we are seeing breakouts of multi-year trajectory points that have very significant historical weight. Silver just joined this festival of jubilant price dynamics by breaking through a multi-year trajectory yesterday and following through with a high volume confirmation today. This type of positive fundamental and technical whirlwind won't disappear overnight, by any stretch. In fact, gold and silver are both set to thrive over the long-term with an acceleration in the price trend as the secular bull market is reinforced in the virtuous cycle for metals to come. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the...
Silver Is Set To Lead The Next Leg Of The Bull Market In Metals
While gold is primarily considered a currency and a safe haven asset, silver is much more an industrial metal. For this reason, the economic sensitivity that silver possesses is a relevant consideration when investing. During periods of global recession, while gold may outperform, silver will typically lag. This is the primary reason why silver has lagged in recent months while gold is up nicely. Any type of indication that global economies, especially those of an emerging nature, are not dipping into a recessionary territory should cause silver to narrow the gap in value between gold substantially. Conversely, should the global economy actually move towards the recessionary route, silver is already discounted to a point where the downside will be cushioned. This is especially true in light of what has a high probability of being continued outperformance in gold, global recession or not. In the chart above, we have a 30 year historical perspective on the ratio between gold and silver. As we stand currently, the ratio of value between gold and silver is at its highest point in 30 years. Scrolling further back, it is in fact at one of its highest points in value of the past 100 years. This type of anomalous condition will be resolved in one of two ways: 1. Gold goes down 2. Silver goes up Given the recent strength in gold, with a host of macro factors working in its favor, the probability of gold moving down to narrow the spread is unlikely. Instead, it should be silver that narrows the spread with a move up over time. Any indication of vitality in the global economy for the remainder of the year has the potential to quickly cause investors to recognize the discrepancy taking place in silver, creating a substantial increase into year end. With global bond investors misallocated into mostly negative yielding fixed income assets, there is plenty of firepower on the sidelines remaining to invest in both emerging and developed markets for the remainder of 2019. These are latent bids that will be have a reflexive effect, reinforcing any positive momentum in global economic growth, as it becomes apparent in the months ahead. During the next leg of the metals bull market, silver has a high probability of not only refusing to take a back seat to a gold rally, but actually leading the rally higher. This has everything to do with progressive stages of a bull market further unleashing animal spirits into assets perceived as riskier in nature, as well as a high probability of a China deal and the accompanying surge in the global economy negating the bearish silver...
Gold Just Clarified Some Nagging Questions
Zenolytics touched on gold recently. On June 12th in a note titled The Enigma That Is Gold In 2019, the following observation was made: Late last year, Zenolytics put out an extensive note titled, Making The Case For Gold. Much of what was discussed in that piece remains highly relevant, if not more relevant today. However, the entire thesis behind gold needs two catalysts in order for the engine to function correctly: A U.S. Dollar that, at the very least, hints at some weakness Some type of event that impairs the risk appetite of investors Catalyst number one in the article from June 12th came into play this week: The US Dollar got pummeled, losing a key support area in the meantime. We all saw the reaction in gold. The yellow metal literally exploded, taking out numerous important resistance areas in the meantime, on some heavy participation by both bulls buying and shorts covering. No need for catalyst number two to take place at this juncture. What should have been a dead giveaway to the fact that gold had significant underlying strength for the entirety of the first half of 2019, up until the breakout point this week, is that it didn't care that the US Dollar kept persisting in its strength. Gold knew ahead of time that the Fed would be sacrificing the US Dollar in order to preserve the strength of the markets and hopefully the economy, as a result. All the meanwhile, global central banks are now pursuing inflationary policy that will favor hard assets over paper currency. What we now know is that inflationary trade may come alive sooner than most think. Gold just told us this. Hard assets will appreciate. Stocks should generally rise. Long end of the yield curve will explode. The trifecta of developed countries pursuing inflationary policy, a newfound lust for protectionism in trade and exploding government balance sheets worldwide is not something anyone in the current investment generation has experienced. Goggles and helmets required as we move deeper into the cave from here. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital...
The Enigma That Is Gold In 2019
Late last year, Zenolytics put out an extensive note titled, Making The Case For Gold. Much of what was discussed in that piece remains highly relevant, if not more relevant today. However, the entire thesis behind gold needs two catalysts in order for the engine to function correctly: A U.S. Dollar that, at the very least, hints at some weakness Some type of event that impairs the risk appetite of investors The entire dilemma faced by gold investors presently can be summed up by neither of the aforementioned factors buoying the gold market. As a result, we have a hot and cold market that is more trendless than anything. This doesn't take away from the fact that over the long-term there may not be a better risk/reward play than gold after years of going absolutely nowhere. As far as the long-term price trend is concerned, gold is likely at a similar spot on a risk/reward basis as it was in 1999/2000. The "paranoid gold bugs" that have tattoos of Jim Rickards on their pelvis will eventually be vindicated, as the upside will more than likely be parabolic in fashion once it begins. The only question is when? And simply sitting in an asset waiting for that when is a lot more difficult than it sounds. Especially when you have all types of cool asset classes like ride sharing, SaaS, 5g semiconductors, social media etc. to park your capital in. After all, it is much more fun to talk about your shares of Snapchat at a party than your conviction about the macro-economic benefits of having gold in a portfolio. With that said, Zenolytics is taking an active viewership role in gold over the near-term. There are some appealing miners out there that may be worth initiating on the long side, in fact. At the very least, gold certainly fulfills its role as an overall portfolio insurance policy selling at a very attractive premium given current prices. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice. This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website. T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption...