Gold Forecast: What Should You Do If You Missed The Breakout In Gold Prices?

Wednesday, June 26, 2019

gold analysis

I'm seeing a lot of angst amongst gold investors that missed the recent runup. Precious metals and miners are nearly impossible to trade in the middle of a momentum surge. These are emotional assets, and prices move fast. Instead of looking at the immediate price action, I suggest stepping back for the 30,000-foot view. And it's telling me the bull market is just getting started.

Investing is not a race...it's a marathon. The more you look at prices, the more likely you are to make an emotional decision. Sure, the price of NUGT has doubled from $15.00 to $30.00 since May. But look, the last time gold was above $1400 (2013), NUGT was trading at $843. Why has NUGT lost 95% of its value in 5-years with gold trading at the same price? Because it's a horrible long-term investment...it is guaranteed to go lower and lose value.

NUGT was at $843 the last time gold traded above $1400 in 2013.

Nearsighted traders don't see or understand the decay issues with triple leveraged ETF's. They are a disaster long-term...a suckers bet. To make money, real money, investors need a multi-year strate

STEP 1) Find an undervalued asset, a real asset, not some paper abomination like NUGT.

STEP 2) Strategically and steadily accumulate that asset when prices are undervalued.

STEP 3) Wait patiently for the trend to change. No asset class stays in a bear market forever.

STEP 4) Once the trend changes buy the dips as prices begin to rise.

STEP 5) Sell your holdings into strength and when public interest reaches a zenith.

So, what should investors do now? Both silver and platinum are lagging gold significantly - some argue a non-confirmation. I think it's due to their industrial nature. With gold above $1400, it's probably just a matter of time before investors sets their sights on gold's undervalued cousins.

Think about it. Gold futures are trading at $1433 as I write. Anyone looking to buy may say "Oh, that is too expensive - what's cheap?" Well, silver just reached a gold to silver ratio not seen since 1993. Or take platinum - over the last 40-years platinum has traded at a premium to gold about 85% of the time. In fact, in 2000, 2004 and 2008 platinum was more than double the price of gold. Today, platinum futures are trading at $818, some $600 below the price of gold.

Wait - isn't platinum slipping because the demand for diesel motors is in decline? Yes, catalytic converter demand will wane with the rise of electric vehicles, but that's a 20-year process (at least). I'd guess less the 1% of all vehicles on today's roads are 100% electric.

Moreover, something like 70% of all platinum production comes from South Africa. According to www.statista.com, South African production costs were $985 an ounce in 2018. How long will they mine the lion’s share of world’s platinum at a loss? And don't forget the potential for geopolitical problems (nationalization). 

 

There are many uses for platinum, not just as a catalyst but also as an alloy. Below is a snippet from an article I read last year.

Platinum-gold alloy is the most wear-resistant metal in the world

"Researchers at the Sandia National Laboratories in New Mexico engineered a platinum-gold alloy believed to be the most wear-resistant metal in the world.

The metal is 100 times more durable than high-strength steel, making it the first alloy, or combination of metals, in the same class as diamond and sapphire.

The alloy is made of 90% platinum and 10% gold, which is nothing new. The innovation behind it is the handpicked metals, proportions, and a fabrication process that the scientists employed based on simulations that calculated how individual atoms were affecting the large-scale properties of a material.

Using an example to explain their achievement, the researchers said that the alloy is so durable that if car tires were fabricated with it, it’d be possible to skid around the Earth’s equator 500 times before wearing out the tread."

That sounds like a beneficial industrial application. Moreover, with platinum nearly half the price of its close cousin palladium, it's only a matter of time before manufacturers look to take advantage of the price disparity and use platinum to cut costs.

What I'm saying is though it feels like gold and miners may be running away from you, fear not, there are plenty of opportunities. Miners are too volatile for most traders to profit consistently. Not to mention the inherent issues individual companies face - if you decide to trade them, better load up on some antacids.

Silver and platinum are cheap, historically, and compared to gold. Now prices may not rise tomorrow or next month. In fact, they could drop a little further. But, if gold is in a bull market, as it recently signaled, then these metals will play catch up. And when they do, the rise is often spectacular.

So instead of freaking out and panicking into the overbought miners...relax and make a plan to average into silver and platinum. I recommend unleveraged positions, preferably bullion because we don't know when prices will breakout; it could take several months to a year. I'm thankful, personally, for the opportunity to buy these incredibly rare metals at historically cheap valuations, in most cases below the cost of production.

AG Thorson is a CMT and editor of the Gold Predict newsletter. For free updates or to become a member, please visit www.goldpredict.com.

*********

Gold-Eagle provides regular commentary and analysis of gold, precious metals and the economy. Be the first to be informed by signing up for our free email newsletter.
 

Free Gold-Eagle Newsletter!

  • Fresh weekly insights on gold, precious metals, and the economy
  • Leading authors from around the world
  • Always free
  • Stay informed!

 

AG Thornson

AG is an accredited CMT through the MTA and the editor of GoldPredict.com. His members receive daily updates and regularly scheduled reports 3-days a week. He prides himself on making his analysis easy to understand through the use of adaptive and creative charting methods. You can reach AG at info@GoldPredict.com.