Gold Is Outperforming Everything
The comments below are an edited and abridged synopsis of an article by Jordan Roy-Byrne
Gold’s performance in real terms is important for two reasons. First, it tends to be a leading indicator of the gold price. That is instructive when gold is rebounding but has yet to gain real traction or momentum. Second, when gold strengthens in real terms, it indicates mining margins are likely to strengthen.
Gold is trading around its 200-day moving average, but the moving average’s slope conveys some indecision.
Meanwhile, gold against the stock market, commodities, and foreign currencies is trading above upward-sloping 200-day moving averages. Gold against the stock market is close to a 52-week high, and gold against commodities recently hit a 10-month high.
Jordan looks at charts of gold and when generalist investors will favour it; gold against BIGPX, a BlackRock fund that mirrors the 60/40 portfolio; and gold against the conventional investment portfolio, which is within 1% of a 2-year high. When it breaks above 160, it will explode higher, indicating growing mainstream adoption of gold.
An analyst who only looks at gold would think it is performing okay. It has rebounded, but is struggling around resistance. However, we see the bullish potential when looking at gold in real terms.
The next leg higher in gold against the stock market and 60/40 portfolio should signal that nominal gold is on its way to retesting the all-time high.
Despite the positive developments and underlying strength, many investors remain skeptical and subdued as to what could develop in 2023.
Pay attention and take advantage of the present values. Otherwise, you will pay up after miners and juniors have rallied another 50%.