In recent weeks I’ve read a few missives from
mainstream advisers and pundits on the merits of stocks. These people despise
Gold and are quick to point out that since March 2009, stocks have
outperformed Gold. This means very little as it is an arbitrary date. Gold
will continue to outperform stocks and then stocks will outperform into the
next decade. Trends and markets are cyclical and not permanent.
Conventional equities have had a great run but their time is ending as
Gold is reasserting itself in relative terms and flying high in nominal
terms. In the chart below we graph Gold against the Nasdaq,
Emerging Markets, S&P 500 and the Russell 2000. All of those markets,
with the exception of the S&P 500 have rallied back to their 2007-2008
highs but have failed at that resistance. Gold against these markets has
broken to a 2-year high and is well on its way to retesting the peak from
Essentially, money is moving out of equities and into Gold.
We’ve said all along that before Gold begins a bubble, equities must
peak and begin a mild bear market. That is now happening. The final piece
will be money begins to flee Bonds. We are already seeing this globally but
not universally as Bond markets such as Germany and the US remain strong.
However, recent weeks should tell you that a peak in equities is providing
Gold with plenty of firepower. Those who thought it was time to forget Gold
and concentrate on conventional stocks couldn’t have had a more costly
Nevertheless, one could and should consider the Gold and Silver stocks
which are set for big gains in the next few years. These equities have lagged
the metals but this is what has happened in the current and in previous bull
markets. Gold just closed at a two-year high against Oil and a 10-month high
against Commodities. This means that margins remain and will be robust in the
future. Finally, note that the mining equities are one of the few groups to
have made a new all time high. Keep an eye on GDX
and GDXJ as the next move to new highs will be a major buy signal and will
usher in a very strong run over the next few years.
Roy-Byrne, CMT is the editor and publisher of Trendsman.com. You can get a
free 14-day trial to his Gold/Silver service by clicking