“You should acquire physical gold now and put your mind at ease.”
-Jim Rickards
Technically speaking (and oh boy do those “technicals” drive emotion), yesterday was the biggest buying opportunity in Gold in the last 3 years. But why the panic in something that has generated such tremendous returns during the #GrowthSlowing panic of 2016?
And why is it that everyone in perma bull SPY space understands the concept of buying dips in Amazon (AMZN) but can’t quite wrap their head around the investing exercise when it comes to buying either Long-term Bonds or Gold?
As Jim Rickards advises in The New Bull Case for Gold: “Don’t try to time the panic; by the time it’s visible it will already be too late, and the small investor will not be able to get physical Gold. The prudent course is to buy Gold now, have it in a safe place, and when the Gold buying panic comes, you’ll be fine.” (pg 151)
Back to the Global Macro Grind…
Panic? Uh, yeah. Not that memories for the Old Wall and its manic media extend beyond the most recent macro tourist headline, but I assume that the prudent Global Macro investors recalls how Gold did when most US stock market bulls panicked in JAN-FEB 2016.
That’s when Gold broke out, in Hedgeye vernacular, into what we call a Bullish Phase Transition. Those occur when anything that trades undergoes a regime change from bearish to bullish on our intermediate-term TREND duration.
No, these aren’t your grand-pappy’s “technicals.” They aren’t for your Mo Bro chart chasing 50-day-moving-monkey-panic-attack-people either. Phase Transitions are for long-term investors and risk managers alike. They are multi-duration, and multi-factor.
So, other than a 1-day hyperventilation, what’s changed for Gold?
- Did the US and Global Economy start magically accelerating yesterday?
- Does the #LateCycle data (consumption and employment) starting to slow for real no longer matter?
- Post the Pound crashing, is there a “new normal” of confidence in currencies that are losing share to Gold?
Seriously, if you want to panic about 1-day moves in “charts”, there’s plenty of spew on both Twitter and blogs that you can read for free this morning. You pay us to do the real research with a quantitative risk management overlay.
Not only does my research team collaborate with Jim Rickards on Gold, we’ve started to work with who I consider modern macro long-term Gold bulls, Josh Crumb and Stefan Wieler (of former Goldman fame) who publish Gold Money Insights.
Like me, these guys don’t turn-tail the minute Gold has a big down day. They buy more. You can read their market update here: www.wealth.goldmoney.com, and this excerpt was the highlight:
"Importantly, for gold to go higher from here it doesn’t need any Malthusian thinking. None of the scenarios above require a renewed global meltdown of financial markets or an even bigger event, such as a full blown currency crisis. The FED itself has simply set the floor for gold prices by revising its own guidance for rates to a point where the most hawkish scenario is that real-interest rates can only move marginally higher from here."
And that’s really the point. Get growth and rates right (by doing your own work – not blindly accepting the Fed’s fickle forecasts), and you’re going to keep getting Gold right.
Don’t forget, post this said colossal and crashing correction, Gold is still +20.1% YTD vs. the SP500 +5.2% for good fundamental #GrowthSlowing reasons.
If you’re new to our research, here are some ways to both invest in and risk manage Gold:
- Buy physical Gold bullion when it trades towards (or drops below) the low-end of my $1 risk range
- Buy Gold’s ETF (GLD) when it trades towards (or drops below) the low-end of my $119.42-128.84 risk range
- Buy a fund that buys/holds physical Gold bullion (CEF) at or through the low-end of my $13.01-14.49 risk range
You’ll note that neither in this strategy note this morning, nor in Real-Time Alerts yesterday, did I say to buy Gold Mining “stocks.” Especially with “junior mining stocks”, that’s because they have something I don’t want at this stage of #TheCycle – High Beta!
That’s right. As we enter the slowest phase of both year-over-year US and Global #GrowthSlowing (Q4 we’re at 0.4% q/q SAAR GDP), I want to high-grade my asset allocation to liquid positions that I can get out of during a full-blown US Equity market draw-down.
That means, from a Style Factor perspective, I want to own Low-Beta and Liquidity. That’s why owning an ageless physical currency that will be in super short supply during the next market panic makes sense to me. Put your mind at ease. That currency is Gold.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.52-1.72%
SPX 2140-2162
RUT 1
VIX 12.01-16.78
USD 94.99-96.35
Oil (WTI) 43.89-49.98
Gold 1
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
