The US stock markets’ latest record highs have left traders exceedingly euphoric and complacent. They are utterly convinced this stock bull will power higher for years to come. But their enthusiasm is very misplaced. In real inflation-adjusted terms, the US stock markets only just regained breakeven levels 15 years after the last secular bull peaked. Now the secular stock bear ever since is overdue for a new cyclical bear.
Gold’s sharp early-year surge has fizzled in recent weeks as investment demand faded. The primary reason is the universal belief that the Fed’s upcoming rate hikes are very bearish for gold. Higher rates will make zero-yielding gold relatively less attractive, argues this popular thesis. But history proves just the opposite…
There’s no doubt the gold-mining stocks remain deeply out of favor, collateral damage from the Fed’s gross financial-market distortions of recent years. But sentiment is shifting, with stock traders starting to regain interest in this left-for-dead sector.
Gold-stock trading volume is really growing as capital returns. And since higher volume is an essential precursor to major new uplegs, its growth is a very bullish portent.
It was in 1896 when prospectors stumbled across large quantities of gold in one of the tributaries of the Yukon’s Klondike River. Word of this discovery spread like wildfire. And in no time at all prospectors from far and wide set course to get a piece of the action. The aptly named Klondike Gold Rush ended up being one of legend!
Gold surged this week on massive buying from stock investors and speculators. This critical group of traders and their vast pools of capital utterly abandoned gold in the past couple years. So to see them start to flock back is a watershed event, heralding a major reversal in gold’s fortunes.
And with their gold exposure remaining near extreme lows, they have vast buying left to do to restore prudent portfolio diversification.
Silver looks to be on the verge of a major new upleg, finally emerging from the past couple years’ ugly sentiment wasteland.
This beleaguered precious metal recently bottomed as futures speculators threw in the towel on their extreme shorting.
And while investors’ ongoing silver stealth buying continues, it’s been modest.
So there is vast room for capital inflows to accelerate dramatically as gold mean reverts higher.
Silver dropped 19.7% in 2014 after plunging a brutal 35.6% in 2013. Such dismal performance naturally left silver universally despised, the pariah of the investment world. But that is changing.
Silver is ready to run again, a very exciting prospect given the huge uplegs it is renowned for.
Gold stocks have suffered a miserable few years, becoming a laughingstock even among contrarians.
But this despised sector’s seemingly-endless downward spiral has left gold stocks vastly undervalued relative to gold, which drives their profits.
The fundamentally-absurd disconnect between gold-stock price levels and gold can’t last.
And it sure looks ready to end, making 2015 the year gold stocks shine again.
The prevailing valuations in the lofty US stock markets are increasingly becoming a bone of contention.
Wall Street calmly asserts stocks are fairly valued or even cheap, since it has a huge vested interest in keeping people fully-invested. But a growing chorus of dissenters is disputing that idyllic notion, warning that stock valuations are very high and portend great downside risk. Indeed, topping valuations abound.
Gold’s been on an incredible roller-coaster ride over the past couple months, whipsawing like crazy.
And contrary to popular rationalizations, these swings had absolutely nothing to do with fundamentals.
Their sole driver has been American speculators’ extreme shorting of gold futures, which has battered gold’s price around in the absence of investment demand. But this epic gold shorting looks exhausted.
Gold has suffered a rough couple of months, getting pounded below major support. One driver was stock-market capital flowing out of gold again, as evidenced by renewed differential selling pressure seen in gold-ETF shares. But this was minor compared to last year’s, despite extreme bearish sentiment plaguing gold.
Gold-ETF selling exhaustion has effectively been hit, paving the way for big rebound buying.
This latest capitulation by gold-stock investors has left this hated sector at truly apocalyptic lows. Bearish consensus is so extreme that pretty much everyone believes the gold miners are doomed to spiral lower forever. But today’s horrendous gold-stock price levels aren’t righteous, they’re a temporary emotional fiction conjured by epic fear. Trading at fundamentally-absurd levels, gold stocks are due to mean revert far higher.
Americans spoke loudly and clearly at the polls this past week, repudiating Obama’s and the Democrats’ failed big-government policies.
This huge Republican victory has serious implications for the Fed and US stock markets. Republican lawmakers have long opposed this easy Fed, and they will put great pressure on it to normalize its balance sheet and interest rates.
This is an ominous omen for these Fed-inflated stock markets.
Elephants are the world’s largest land animals. And though there aren’t many, they can still be found scattered across the planet. In the mining industry, super-large-sized deposits are often referred to as elephants.
Like the animal, these deposits aren’t all that common. But also like the animal, they can still be found.
Battered silver remains deeply out of favor, recently plumbing miserable new lows after drifting sideways for most of 2014. This metal’s relentless and oppressive weakness continues to break the wills of long-suffering contrarians. But professional investors are taking advantage of the epically-bearish psychology plaguing silver. They’ve been steadily accumulating positions all year long in massive stealth buying.
Silver certainly wasn’t always a loathed market pariah. Back in early 2011, silver blasted up above $48 on widespread enthusiasm from investors and speculators. It was one of the 2000s’ greatest bull markets, up an astounding 1105% during a 9.4-year span where the benchmark S&P 500 limped to a 20% gain. The brave contrarians fighting the herd to buy silver low in the early 2000s greatly multiplied their wealth.
So with silver now super-low and despised, it seems like no one wants anything to do with it.
There is a widespread belief that silver is no longer cyclical, that it is doomed to spiral lower forever.
Now, not even the majority of contrarian investors, who claim they like buying out-of-favor assets cheap, will touch silver with a ten-foot pole. It has been left for dead, starved for capital in a parched wasteland of hyper-bearish sentiment.
But provocatively, such extremes are exactly what major bottoms are made of.
Since early 2013 the US stock markets have done nothing but rally, levitating thanks to the Fed’s oft-implied backstop. This incredibly unnatural behavior has left sentiment dangerously unbalanced, with hyper-complacency and euphoria running rampant. Only a major selloff can restore normal psychology.
And with the Fed’s third quantitative-easing campaign ending, odds are high such a big downside event looms.