More Bullish Charts on Gold — and a Great Way to Play This Rally

I hope you saw my interview over the weekend with Bob Archer, the CEO of Newrange Gold (OTCQB: NRGOF). Bob has been chasing after gold and silver for a long time, and he has some strong thoughts about what is driving the rally: Geopolitical stresses, macroeconomic forces, the weakening dollar, and an accommodative Federal Reserve.

In the article, I included a couple of charts, on gold’s price breakout and on the gold-silver ratio. You should definitely check it out.

And FYI, I bought Newrange’s stock last week. It’s blasting off.

Today, with gold trading at a six-year high, I have three more charts to show you —  and a pick for anyone not already riding this massive megatrend higher in gold.

As Bob says, there are many forces driving gold higher. But the rally is primarily driven by signs that the Federal Reserve and other central banks are turning more dovish on monetary policy. This, in turn, has sent the U.S. dollar bumping down the stairs to a three-month low.

And this means American investors get to enjoy what international investors have seen for months: new highs in gold.



Helping spur that surge in gold prices is the fact that funds that hold physical gold are seeing buying interest surge. The SPDR Gold Shares (NYSE: GLD) is getting the lion’s share of the inflows.



On the right, you can see the one-day surge in money pouring into physical gold ETFs. Funds backed by gold increased their assets by 32 metric tons (a little over 1 million troy ounces) on Friday. That was the biggest one-day increase since 2016. So far this year, funds have purchased a net 2.63 million troy ounces of gold.

ETFs also added 931,541 troy ounces of silver to their holdings on Friday, bringing this year’s net purchases to 3.49 million troy ounces.

Meanwhile, the amount of negative-yielding debt in the world is soaring. It’s now above $13 trillion worth of bonds around the world. This affects gold as well.



Why do negative-yielding bonds affect gold? Because one of the complaints about gold is that “it pays no interest.” Well, neither do many bonds, nowadays. So as the amount of negative-yielding debt issuance rises, that makes gold more attractive.

In fact, with negative rates, it now is theoretically cheaper to buy and store gold than to hold some financial assets.

Speaking of central banks  …

Central banks are diversifying their assets away from U.S. Treasuries (and the dollar). According to the World Gold Council, central banks bought 145.5 metric tons of gold in the first quarter of this year. That’s the most since 2013.

In particular  …

  • The People’s Bank of China has bought more than 70 metric tons of gold since December.
  • Russia buys gold nearly every month. In May, it added another 200,000 troy ounces (6 metric tons). Last year alone, it added 274 metric tons to its reserves.
  • India is also buying gold at a fierce clip. That country’s central bank bought 42 metric tons last year, and its gold reserves stand at a record high of 609 metric tons.
  • Kazakhstan, Iran, Turkey and more are all adding gold to their reserves.

So, there plenty of reasons to be bullish gold. But what if you haven’t bought yet? What if you’re watching this rally in gold, silver and miners from the sidelines?

You could wait for a pullback. (There are always pullbacks.)

Or, you could just buy something that’s hot and ready to rocket right now.

My suggestion would be the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ). As the name suggests, it’s a basket of leading gold junior miners. Let me show you a weekly chart of this ETF, and I’ll explain why now is the time to buy it  …


Image credit: StockCharts.com

Looking at the chart, you can see that the GDXJ is pushing above overhead resistance. It has a lot of room to go higher. And on the bottom of the chart, I’ve put a line showing the price of GDXJ divided by the price of gold. Since late April, the GDXJ has outperformed gold.

That’s exactly what you want to see in a gold bull market. These stocks are leveraged to the metal. So naturally, they’ll outperform on the upside.

All the best,

Sean

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