Uncategorized
Share this news article...
Share on LinkedIn
Linkedin
Share on Facebook
Facebook
Tweet about this on Twitter
Twitter
Share on Google+
Google+
Email this to someone
email

Gwen Preston – “Maven Mondays”

 

 

 

 

 

 

 

I usually send a snippet from the previous week’s Maven Letter in these Maven Mondays but, with stock markets diving, comments from five days ago are already dated! 

 

Instead, I’ve thrown together a few comments on the current situation.

 

Gold fell with stocks on Friday, which was disheartening. Today that changed; gold gained alongside the US dollar while stocks fell. Of course, gold and greenback rarely rise together. It can happen, but it requires some kind of pervasive fundamental rationale. Today that rationale was good old safe haven buying. 

 

I think what is happening is a run-of-the-mill bull market correction. Those often entail losses in the 10 to 15% range, so we’re only halfway there (hold onto your hats!). If that is the case, it’s a good thing. A correction would really strengthen the bull market’s base, giving it the foundation to continue for a while yet. 

 

And as metals investors, we want that. The big bull argument for commodities right now depends on coordinated economic growth; a stock market crash would derail that. 

 

A correction would also do much to shift perspectives on how to invest at this stage of the game. This bull market has been so long and strong that FOMO – Fear Of Missing Out – has become the primary investment rationale. A real correction will encourage investors to instead fear the day when the market turns down for real, which is a more pertinent focus at this stage of the bull market.

 

That shift would encourage safe haven buying – gold and the dollar – while also encouraging investors to seek out real value. Few stocks offer value today; mining stocks are among the select few. So a shift towards security and value can only help the metals and mining sector. 

 

I’ll note here that Bitcoin tracked equities down today, rather than following gold and the dollar up. It only emphasizes that, whatever their proponents might say, cryptocurrencies are a speculation and not a currency!

 

A correction right now makes sense in all kinds of ways. It had been too long since equities corrected. Markets – especially US stock markets – are prone to weakness early in the year. Greed had gotten extreme. 

 

A correction means a bumpy ride in the short term, but a stronger setup long term. The interesting question now is: will markets correct enough to push gold above resistance at US$1,360 per oz? If so, things will get very interesting – and profitable – in the gold sector, and soon. If not, then real opportunity is just delayed until later in the year.

 

If this turns into a crash rather than a correction (which I doubt it will), the playbook changes. Gold will gain but stocks of all kinds – including gold miners – will fall, at least during the crash itself. Once the worst is over, I would expect the gold sector to have the kind of sharp and highly profitable recovery that we saw in 2009…but we would have to endure pains before those gains. 

 

Posted February 6, 2018

Share this news article...
Share on LinkedIn
Linkedin
Share on Facebook
Facebook
Tweet about this on Twitter
Twitter
Share on Google+
Google+
Email this to someone
email

MORE or "UNCATEGORIZED"


The Week of August 13th to August 19th, 2018 “A Brief Look Back Into Tomorrow”

The new North American trading week began on Monday, August 13th ... READ MORE

August 20, 2018

Lobo Tiggre - "The Thud Factor"

The “thud factor” is a rhetorical device used to obscure weak... READ MORE

August 20, 2018

Global lithium production to triple over the next four years, says GlobalData

High growth in demand for lithium batteries is spurring three-fol... READ MORE

August 20, 2018

Nemaska Lithium Finalizes a 5-Year Supply Agreement With Northvolt

Nemaska Lithium Inc. (TSX:NMX) (OTC:NMKEF) and Northvolt AB are p... READ MORE

August 20, 2018

Sabina Gold & Silver Drills New High-Grade Discovery at Back River Gold Project and Increases Summer Drill Program to 12,000m

Sabina Gold & Silver Corp (SBB.T) is pleased to announce firs... READ MORE

August 20, 2018

Copyright 2018 The Prospector News - Site design by Spyderbaby Productions