Sad Old Man Rocks making new high

Just a quick update on the gold breakout I wrote about on July 1st. Lots of follow-through for the metals ETFs and related mining stocks. Gold is now decisively above its previous nominal highs.

In my experience, once an asset class or commodity takes out a multi-decade high, it’s probably a mistake to think you’re smarter than the crowd and fade it. Think about the wise guys who wanted to sell into the Nasdaq as it challenged the dot com bubble high of 5,000 – now it’s 10,000 just a few years later.

The gold rally feels like it’s just getting started, even though it’s been running since November. The US dollar index (dollars against a basket of currencies) is hitting 2-year lows as deficits and debt levels explode. In the meanwhile, miners benefit from constricted supply (coronavirus shutdowns) plus generational lows in fuel costs. As far as the mining stocks – lots of discovery taking place as a whole new generation is being exposed to Austrian economics, MMT debates, dollar devaluation, fiat fights, inflation, etc. Not to mention the new crop of momentum traders who’ve never seen a loss in their lives.

Here’s Peter Boockvar this morning on what’s changed since the last time gold prices hit these levels nine years ago:

With respect to gold now that it has reached a new high, surpassing the September 2011 peak, compare the fundamentals today vs then. Then, NIRP didn’t exist and I don’t believe it was even imagined as a possibility (I guess I say that naively now knowing what some central banks have pulled off). Today there is about $15 Trillion yielding less than zero. The Fed’s balance sheet was just under $3 Trillion vs about $7 Trillion today while US nominal GDP is up about 35%. The ECB’s balance sheet has tripled in size since and we know where the balance sheets of the BoJ, BoE, SNB, etc… have gone and that is way up. The 5 yr REAL yield in mid 2011 was between -.50% and -1.0% vs -1.10% today. The US national debt is at $26.5 Trillion vs about $14.5 Trillion in 2011. The dollar index in 2011 was between 75 and 80 vs 93.8 today.

Gold is up 24% year to date and has annualized at about 10.5% in the last five years, putting its returns very close to those of the stock market, with very little correlation day to day. Jason Zweig did a really great mea culpa at the Journal this weekend and took back some of the stuff he’s said about gold in the past. The graphic alone is worth the click.

Gold is attracting a lot of money in a hurry. Exchange-traded funds, which had $118 billion in gold assets a year ago, now command $215 billion. One-fifth of all that money has flowed in since Jan. 1, according to the World Gold Council, accounting for nearly half of global demand for gold. In the first half of 2020, gold-backed ETFs lured in a record $40 billion, up from $5 billion in last year’s first half.

As you can see in my chart below, while the two largest gold ETFs representing ownership of the metal itself – GLD and IAU – have risen substantially, the miners (in the ETFs GDX and GDXJ) still have a long way to recover if this thing has legs.

Just to reiterate – it’s a commodity, not a religion. Conduct yourself accordingly and don’t fall in love.

See also:

There goes the dollar (TRB)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. sex commented on Sep 18

    … [Trackback]

    […] There you can find 23888 more Info to that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  2. orangeville real estate agents commented on Oct 16

    … [Trackback]

    […] There you will find 8298 additional Information on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  3. 메이저놀이터 commented on Nov 01

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  4. scotia login commented on Dec 03

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  5. https://bestroofguy.com commented on Dec 06

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  6. Kampala International University commented on Dec 30

    … [Trackback]

    […] Here you can find 8377 additional Info on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  7. Digital Transformation commented on Jan 16

    … [Trackback]

    […] Find More on to that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  8. Fortinet FortiDB manuals commented on Jan 20

    … [Trackback]

    […] Here you can find 40925 more Information on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  9. TDK Home audio sets manuals commented on Jan 24

    … [Trackback]

    […] There you can find 40986 more Info to that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  10. fresh dumps online commented on Jan 26

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]

  11. pendaftaran cpns untuk sma commented on Jan 31

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2020/07/27/sad-old-man-rocks-making-new-high/ […]