How well did you time your recommendation to invest in gold, silver and mining stocks?
We first started recommending precious metals on November 3, 2023. Since then, gold and silver have both risen 68% and stocks of gold and silver mining companies have increased by an even greater 92%. They have all significantly outperformed the S&P 500, which has risen 48% since then. Not too shabby.
By the way, not only has gold outperformed the S&P 500 since late 2023, but gold has outperformed the S&P 500 in price since 1997! Most investors would be shocked to know that gold has outperformed the S&P 500 for the past 28 years, as this chart shows.
This would likely also surprise Warren Buffett, who has repeatedly ridiculed investing in gold since it does not produce income, which is one reason he also ridicules investing in Bitcoin. He once said, “I have no views as to where (gold) will be (in the next five years), but the one thing I can tell you is it won’t do anything between now and then except look at you.” Well, we’re sorry Mr. Buffett, but gold has done more than look at you. It has outperformed all your hard work over the past 27 years by outperforming Berkshire Hathaway since 1998.
Why did we start recommending precious metals in November 2023?
Fundamentals
Fundamental factors have been key to our bullish stance on gold, silver and precious metal mining stocks since November 2023. The “stagflationary” conditions that the US economy has been suffering from have been very bullish for gold and silver. This includes stubbornly high inflation that remains well above the Fed’s arbitrary 2% target, as well as weak employment and growth trends.
Persistently high US Federal government spending, deficits and debt have also been bullish for gold and silver. The wars in Russia/Ukraine and the Middle East have spread fear, which is bullish for precious metals. Political uncertainty and discord also provides a bullish backdrop for gold and silver.
Another important long-term fundamental factor is the attractive valuation of gold relative to GDP on a historical basis, as shown in this chart. This is in contrast to US stocks, which are trading at all-time high historical valuations relative to the economy. This suggests precious metals will provide much higher returns than stocks over the coming decade or so.
Technicals
Bullish technical chart factors have also been critical to our bullish stance on precious metals. This daily chart shows the price of gold broke above its 250-day moving average and trend line just before our early November 2023 recommendation. Gold was also outperforming the S&P 500 for a year (second clip), On Balance Volume was rising (third clip) and medium-term momentum turned positive based on the Special K indicator (fourth clip).
The bullish technical picture was also supported by favorable intermediate-term momentum with the weekly PPO turning positive….
and favorable long-term momentum with the monthly PPO being positive.
Investment Implications
We have been very bullish on gold, silver and mining stocks since November 2023 and it has been a very profitable stance. At some point, this precious metals bull market will end, as all bull markets do. We will do our best to identify that trend change based on fundamental and technical factors such as the ones we have discussed in this Q&A. Until then, we recommend enjoying and profiting from the gold and silver bull market.
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