Q4 has been a doozie for investors, domestically and globally. Cash is the best performing asset YTD. There have been very few places to hide and the financial media has been running wild with their misleading headlines. It’s also that time of year where investors are hit with useless 2019 S&P 500 year-end price targets. So here I sit as I make an educated guess, backed up by charts, on which sector to own in 2019. That space is: Precious Metals.
My post today is specifically about Gold, Silver and their respective miners. If you’ve been paying attention you’d know Palladium is also one of the only assets continuing to hit ATHs in the face of everything going on out there.
Gold isn’t something I would buy until we get an official breakout above $1,400 resistance, but it’s probably fair to say that is where we are heading next. Gold has been an avoid since 2011 but the base being built here over the past 5 years is within context of a longer-term uptrend since 2001. The higher likelihood is that we continue higher rather than lower.
Silver is showing clear signs of support here around $14. I ask you to find a better risk-to-reward trade out there at the moment..
3) Gold / Silver Ratio
In the last 20 years, every time this ratio gets into ~85 area it rolls over. That is exactly what we want to happen again, meaning Silver begins outperforming Gold. We are in a bullish environment for precious metals when that happens.
4) Gold Miners
Gold Miners have been in an ugly downtrends since Gold peaked in 2011. The good news is we are close to attempting breakouts from this downtrend. A breakout in this along with GDXJ would confirm a bullish outlook on the sector. A few individual Miners are already out there flying higher..
5) Gold Bugs / S&P 500
This chart is my personal favorite and a very bullish one for the sector. We are seeing a false breakdown of the late 2015/early 2016 lows and a breakout of the downtrend since the peak in August 2016. This chart is screaming higher prices for Miners and outperformance of Miners over S&P 500..
6) Gold / S&P 500
The S&P 500 has clearly been a better investment than Gold BUT if we can get back above 2015-2017 support that may change and change fast. I think we may be putting in a false breakdown down here. From false moves, come fast moves. Now this doesn’t mean I think the S&P 500 is going to zero. Gold will just be the better place to have your money parked. Everyone is so prepared for the financial crisis of 2019, I could see many jump ship from equities if this sector begins trending.
7) Russell 2000 / Silver
Last but not least is a comparison of the “risk-on” asset in stocks and precious metals. We are seeing a false breakout in Russell / Silver ratio. Unless something drastically changes, Silver is the better investment going forward.
Thanks for reading and Happy New Year!
I am personally long Silver and Junior Miners at the moment. (Note: All charts as of the December 17th, 2018 close.)