The comments below are an edited and abridged synopsis of an article Charlie Morris

Morris has upgraded gold to a bull market for the first time since 2012. Back then, the message was that a bubble was unwinding. Now, things are looking up.

Gold Is Back in A Bull Market—It’s Time to Buy | BullionBuzz

A bull market requires a score of three out of three on these simple tests: Easy money (defined as US cash real -i.e., after inflation–interest rates below 1.8%); the long-term gold trend in non-dollar terms must be positive; and gold must be beating the stock market.

Easy money: With US inflation (as measured by the CPI index) at 2.5% and interest rates at 2.25%, the real rates test is met, as they are negative. The risk comes from the relentless pursuit of sound money, which is possible as the Taylor Rule states that US interest rates should be 5%. However, recent talk of the Fed slowing down its tightening stance is gaining traction.

The long-term gold trend: Morris uses a 35-month moving average to measure gold in multiple currencies, excluding the dollar. When the gold market is quiet, it goes through periods of mirroring the dollar, and so by stripping out this source of volatility, there is a clearer picture of the underlying trend. This long-term signal remains in good health.

Gold beating the stock market: Gold should be beating equities, specifically the S&P 500. While the 35-month trend isn’t yet positive (as of December 2018), Morris is overriding the model on this point because the equity trend is now negative, and it seems likely that an equity bear market is now underway.

Morris discusses an exhausted bull market for equities; the return of inflation; and has a word of warning for sterling investors.

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