The trend for this gold bull market is as strong as ever, but I think it’s important to give you continual context so that you can make informed decisions for your personal gold investments.
We’ve seen a little bit of a slowdown in gold’s upwards trajectory after a very strong first 2 quarters. The context here is that it’s very normal for bull markets to take a breather – especially during the summer months, which historically are viewed as periods of low volume and investor interest.
But despite gold trading flat the past couple of months, it’s still up nearly 30% year to date – and has outperformed stocks about 3X over that time frame.
It might seem like the gold bull is running out of steam, but I just want to highlight the news from the past week alone that should give you an idea of what’s going on.
Late last week, a Federal Reserve Governor abruptly resigned, which opens up the door for President Trump to appoint whomever he wants. He will likely appoint the most hawkish Fed Governor he can find with hopes of installing them as Fed Chair as soon as Jerome Powell leaves the position.
It’s no secret that Trump is all-in on lower rates, a weaker dollar and any other policies that he thinks could spur growth.
At the same time, there’s a case to be made for all of the above – considering that job numbers have been revised lower to the tune of nearly 1 million fewer than previously estimated over just the past year.
In that same vein, late last week Trump fired the Bureau of Labor Statistics Chief after apparently being unhappy with the job revisions – which have been drastic over the previous year and all in one direction. It’s one thing to be wrong in your estimates, but to be consistently wrong in overstating job numbers only to revise downward month after month? Not ideal.
But there’s more…
At the US Treasury, they’re actively running their own version of Operation Twist, by front-loading Treasury sales to short term durations. This practice has the effect of raising shorter-term rates and dampening longer term rates and is supposed to help spur growth.
Debt and spending are already soaring.
All of these little factoids only mean one thing: Powell is the only stem in the tide preventing lower rates, quantitative easing and even a full-on Modern Monetary Theory blowout.
In short, it’s chaos.
Everything I’ve quickly mentioned here from just the past ~5 days is insanely bullish for gold – if relatively bad news for almost every other asset. Uncertainty and currency manipulation are like rocket fuel for gold.
All of that to say:
If you’re waiting for some kind of major correction in the gold market or gold stocks in particular, I don’t know if it’s coming any time soon. It’s always possible of course, but I think this 2 months of a breather in the gold market where the metal has traded relatively flat could be the closest we get to a big obvious “buy now” signal.
As always, I’m building in multiple layers of margin of error into my models and looking to add gold stocks at a significant discount to their net asset value.
One layer is the price of gold itself. I factor in all of my modeling to look at companies that I’d want to own at $2,500/oz or lower. But if gold even stays where it is, these companies all have a massive upside. That’s why I frequently talk about where gold is likely to be in the coming months and years: it can have a huge impact on the profitability of every gold company – but only if you analyze these companies conservatively.
Another layer is to be equally conservative with the amount of gold each of these companies is likely to produce. There are all kinds of metrics, drilling results, official reports, etc. and they all need to be carefully looked at.
But in the meantime, I get the feeling that gold is taking in a deep breath in anticipation of a long trek upwards.
Stay tuned.
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
P.S. Not to mention, the U.S. recently signed off on the “Big Beautiful Bill” — paving the way to $60 trillion in debt. That’s a debt bomb powerful enough to destroy faith in fiat currencies worldwide.
On the other hand you can’t print gold. And you can’t fake real value.
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