Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Why Gold Stocks are Certain to Go Higher

Commodities / Gold and Silver 2010 Aug 02, 2010 - 05:36 PM GMT

By: Jordan_Roy_Byrne


Best Financial Markets Analysis ArticleCertain may not be the best word to use in a post-bubble world. Is anything truly certain? Ok maybe not. If you don't like certain then lets replace it with “highly probable.”

So why is it highly probable that gold stocks will go higher? Let me digress for a moment. Making big money isn't all that difficult. It doesn't involve making numerous profitable trades or correct investment decisions. Simply put, one needs to find the long-term trends and ride them from their infancy to their apex. Currently, there are three long-term secular trends that still have a ways to go. In future commentaries we will discss the other two trends.

So why are precious metals shares bound to go much higher? Firstly, the trend is firmly in place and no one can argue that we are not in a secular bull market.  Now take a look at just a few charts. These charts illustrate that the vast majority remains uninvested in precious metals stocks. This means that the bull market has huge gains ahead whether it lasts five years or ten years.  

I've used this one before but it is so illuminating that it needs to be seen again and again. Anyone who thinks gold is in a bubble needs to see this chart. Yes, despite a 10-year bull market, gold stocks barely register. And just to confirm this data, there was a chart from Barrick Gold last year that showed precious metals as only 0.7% of all global managed assets.

Aside from looking at gold stocks by theirselves, they should be compared to the S&P 500. This comparison will give us an idea of how far along the bull market in gold stocks is. For the gold stocks we use the Barrons Gold Mining Index which dates back to 1938. Nick Laird of sharelynx provided us this chart and he reconstructed the BGMI back to 1890. 

In the mid 1930s, the BGMI/SPX ratio reached 4 and 5. In the 1970s the ratio reached nearly 8 and then 10 in 1980/1981. In the mid 1980s, the ratio rebounded to 7. While the ratio has climbed from near 0.2 to 1.0, it is nowhere close to the peaks seen in previous secular bull markets.

As you can tell from the next chart, precious metals shares are at an inflection point. The Dow Jones PM Index has built nearly a 5-year base while the HUI Gold Bugs Index has built nearly a 3-year base.

Most traders will wait for the breakout rather than buying support. Tell me, if you believe this sector is going higher in the long-term, then why buy at 520 on the HUI instead of at 420 or 400?

In our professional advisory service, we look at numerous technical and sentiment indicators in order to get our subscribers into the market at the best time. Buying weakness can be difficult but not when you have a professional at your side with reliable and time-tested indicators. Furthermore, it is important to know which vehicles and stocks to employ in order to get the best leverage and risk-reward. Consider a no-risk free 14-day trial to our professional service.

As the summer winds down, keep your eyes on the big picture and the opportunities that come only once in a while. Good Luck!

Jordan Roy-Byrne, CMT

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules