The Case for Gold
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PLEASE NOTE THAT THIS INFORMATION EXPRESSES THE VIEWS AND OPINIONS OF SEABRIDGE GOLD MANAGEMENT AND IS NOT INTENDED AS INVESTMENT ADVICE. SEABRIDGE GOLD IS NOT LICENSED AS AN INVESTMENT ADVISOR.
How Far Can Gold Go?
No one knows. Gold is now in a bull market, as we proposed in our February 1, 2016 post in this space. It is not behaving at all like the false springs of 2014 and 2015.
Gold Correction Finished or Not?
For the past eight weeks, gold looks like it has been working off an overbought condition by correcting sideways. Bullish sentiment levels have moderated somewhat without a significant drop in price, exactly what you would expect from a bull market correction, and we believe we are now in a bull market.
Equities: the Anti-Gold Investment Stumbles
From its peak in September of 2011, gold has fallen in tandem with rising equities. This inverse relationship has been the norm for decades. Financial assets, especially stocks, rise in an environment that supports confidence and an increasing tolerance of risk. Gold performs well when perceived risks are rising and confidence is shaken.
Fed Credibility Takes Another Hit
The headline from yesterday's Fed decision was that the FOMC is now projecting two rate hikes this year compared to the four they projected on December 16, 2015. This immediately took down the dollar and pushed the gold price higher on heavy buying.
Recession Draws Closer
On September 18, 2015, we wrote the following: "The stage has been set for western investors to return to gold as the only reliable asset for wealth protection. All that remains, we believe, is for investors to connect the dots.
The Credit Market Cuts Rates While the Fed Pretends to Hike
On December 16, 2015, the US Federal Reserve raised interest rates for the first time in nine years, claiming that the US economy was strong enough, and the threat of higher inflation real enough, that higher rates were needed now.
Gold Outperforming Equities: Further Evidence of a Market Turn
As we have noted frequently in the past, gold's bear and bull cycles closely match the cycles of equity markets, only in reverse. Last week, gold rallied strongly against equities, with the gold/S&P ratio blowing past its previous recent high of last August 24 when equities had a near death experience. Here is the daily chart for the past year.
Shift in Speculative Gold Positioning Suggests Transition to Bull Market
The positioning of traders on COMEX appears to be shifting in a manner that supports a significant change in sentiment and price direction. The Speculators are moving from net short to net long, which was the key factor driving price this month.
Tumbling Bank Stocks Point to Problems in the Financial System?
Banks stocks continue to perform much worse than equities generally as this graph of the ratio of BKX to the S&P 500 index shows. BKX is an index of large US bank stocks.
Credit Markets Betting Against the Fed?
On December 16, the Federal Reserve raised interest rates for the first time in nine years. Such an important move deserves close analysis. In her news conference of the 16th, Janet Yellen staked her rate hike decision on inflation expectations... that the potential for "overheating" in the economy "requires" modest monetary "tightening" now.