UBS told its clients on Wednesday that the gold bull market may be just beginning, according to CNBC.

Gold Bull Market will continue

We told our readers that the long-awaited gold bull market had begun in March… and we were among the first to predict the move in gold equities that began in late-January of this year. Although many newsletters have simply been touting gold while inflation fear-mongering for years, we were decidedly cautious on the metal for long periods during the multi-year bear market that has finally come to an end…

By bowing out to the Fed’s ability to manipulate the markets, we chose to focus on energy (both renewable and conventional) along with technology plays in recent years (2013, 2014 and 2015). However, our sentiment changed in 2016 with the advent of negative interest rates amidst soaring debt and persistently weak global economic growth…

In March of this year, we sounded the alarm that gold’s move from $1,050 to above the $1,200 level was not a false rally, but the beginning of a new gold bull market. By every measure, gold and related equities have outperformed all other major asset classes in 2016. Furthermore, gold is off to its best start since 1974 – up approximately 24% year-to-date.

On March 4th, we outlined three specific reasons the gold bull market was back:

    *    Technical indicators have turned bullish.
    *    ETF inflows are soaring.
    *    Negative interest rates have left investors with limited options.

Alone, none of those reasons are enough to confirm a bull market will last, but together they form a compelling case for gold. It’s time to review each metric to determine where this bull market is, and why it’s likely to keep running.

On March 4th, we wrote that:

“The so-called ‘golden cross’ is not a myth. When the 50-day moving average surpasses the 200-day moving average, from a technical standpoint, a bullish indicator is signaled. This happened yesterday with gold and means the precious metal will likely continue higher now that it has broken above this trend line. $1,300 is another psychological barrier and once gold breaks through that level expect it to continue moving higher.”

technical indicators for gold

Gold’s Golden Cross

Indeed, gold has continued higher; first following the golden cross, then after Brexit which sent the metal through what resistance was left at $1,300. It currently sits near $1,366 an ounce.

Looking at gold today, from a technical standpoint, one has to be aware of the 50-day moving average. As the average moves up towards $1,300, know that a break below this level would be bearish. As long as gold holds above its 50-day moving average there is no reason to sell, technically speaking. The 200-day moving average seen below is an even greater technical support level that if broken would be very bearish for the metal.

Gold Bull Market Technical Indicators

Gold’s ‘Golden Cross‘, which we outlined in early March, has been even more pronounced with gold stocks. Look at the incredible breakout after the 50-day moving average crossed above the 200-day moving average for gold stocks in early March, outlined by the GDXJ below:

GDXJ chart


On March 4th, the day we announced the gold bull market was back, the GDXJ traded between a low of $27.06 and a high of $28.94. On Friday, the GDXJ rallied another 5% to a high of $49.46… it closed just 5 pennies below that high.

Gold ETF inflows are soaring 2.0

The second confirmation for us that gold’s move higher in February and March signified the emergence of a new bull market was due to the reversal and surge in gold ETF inflows. To say this trend has accelerated since our prediction would be a gross understatement as record level buying has occurred in recent weeks.

Last week’s report from ETF Securities revealed a tidal wave of investors flooding into paper exchange-traded funds and products. Inflows into gold ETPs of US$263 million on Friday July 1st was the highest one-day inflow since inception. In total, last week recorded strong inflows of US$433.5 million into gold, silver and the CHF.

Weekly flows by sector
source: ETF Securities


Record inflows fuel gold bull market in 2016

Bloomberg reported on June 29th, that,

“Investors have already poured $12.2 billion into SPDR Gold Shares, topping the inflow for all of 2009 that was the highest since the fund was created 12 years ago.”

Investors buy gold


What we are seeing now is a move into gold unlike anything we saw in its last bull market of 2009, 2010 and 2011 (when its price peaked above $1,900 an ounce).

Negative interest rates are here to stay

Our final point as to why gold had unequivocally entered a bull market in March was due to the fact negative interest rates have left yield-seeking investors with limited options.

The bond bubble simply refuses to pop. As investors continue to pour billions into this inflated market, yields are turning negative; and the risk/return no longer makes sense.

We are not alone in sharing this thesis. Bill Gross, known as the ‘Bond King,’ is credited with building the world’s biggest bond fund at Pacific Investment Management Co. (PIMCO). He is now shying away from U.S. bonds, as well as most other government debt.

Key fact: The yield on the World Sovereign Bond Index fell to less than 1% for the first time last week.

According to Bloomberg data, Gross’ Janus Global Unconstrained Bond Fund had less than 1% of its assets in government securities as of the end of April. The ‘Bond King’ no longer owns many government bonds…

In respect to the trillions of dollars central banks have driven into the bond market, Gross wrote on Twitter: “This is a supernova that will explode one day.”

Bill Gross on Twitter


Zero Hedge said it best in an article titled ETF Securities Reports Biggest One-Day Gold Inflow Since Financial Crisis,

“…because with over 30% of all global debt trading in negative yields, gold’s 0% nominal yield is increasingly looking attractive to those who would rather not pay insolvent government for the privilege of lending them money.”

Just look at Switzerland… while its currency has been performing well against the euro amid E.U. angst, its yields have fallen to all-time lows.

Swiss 50Y yield
source: Zero Hedge


Short-term Swiss bonds, including the 1-3 year, are trading between -1 and -1.2%; but for the long-end bonds to trade in negative territory means that all Swiss government bonds are now below zero.

Last week, the Japanese 20-year and the Danish 10-year also saw their yields turn negative. This is a global happening, and it is leaving investors few places to turn for yield but for the stock market, real estate and precious metals (two of the three asset classes are already at all-time highs).

Investors choosing negative yielding bonds are betting on no inflation for 10, 20 and even 50 years! Imagine what even a normal 2% inflation rate would do to the purchasing power of a 50-year negative yielding bond…

So, why is this happening? Investors are scared and desperate. They are being forced to buy anything with a semblance of value or safety, even bonds yielding negative rates. Ironically, investors all over the world are buying gold for the same reason others are buying bonds. The reason gold investors will win out, however, is because when this fear boils over during the next Brexit-like event (and yes, there will be others), a prominent SDR currency will collapse, catapulting gold higher while it mocks negative yielding bonds.

If we’ve learned anything about human nature throughout our financial careers, it’s the simple truth that people love to buy things that are increasing in value. The minimal opportunities for yield in the markets will drive the price of bullion for months to come. This bull is intact.

All the best with your investments,



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