The commodities sector offers an overlooked opportunity today:
Source: Twitter, Charlie Bilello
The ratio of US stocks to commodities is trading at an all-time low. Put simply, it’s a contrarian investor’s dream. Resource stocks are written off by the market. But that’s unlikely to last forever ― nothing does. Indeed, considering the above, the Goldman Sachs Commodities Index is now trading at all-time lows against the US S&P 500 Index below:
Source: Bloomberg, U.S. Global Investors
When the commodities cycle finally turns around, we could see one of the sharpest commodity bull markets in history. I believe that, when this happens, the Gold & Commodities Stock Trader buy recommendation list should outperform. That’s why you should strongly consider buying my favourite three resource stocks today .
Remember, if the sector runs hard, the best stocks will lead the pack ― especially in the precious metals space. Mind you, this shouldn’t be a shock. I’ve been warning that gold could break out in mid-December since July.
Gold looks set for a big move
Take a look at the chart below:
Gold could slingshot higher into year’s end, and run even harder next year. That’s happened every year since 2014, mind you. In that case, considering the historical correlation, the final gold bear market rally ― and the best yet ― could be about to start. That’s why, if you own the best gold stocks, you could potentially make a lot of money over the coming months.
Look at the latest gold price action on the monthly chart:
Gold has held the blue uptrend line dating back to the 2009 low and is now breaking out higher. I believe ― as I’ve been saying for months ― the yellow metal offers a major buying opportunity today. It pulled back to re-test the black downtrend line and still doesn’t seem in danger of re-testing the blue shaded zone at this stage.
Are we seeing the slingshot play out on target?
I believe, yes.
The future for gold
Gold could break out after the next US Federal Reserve meeting tonight. CNBC wrote on 6 December:
‘Futures traders are stepping up the pressure on the Fed to ease the pace of interest rate increases.
‘Amid the latest round of market turmoil this week, the market has lowered the probability of an interest rate hike when the central bank’s policymaking body meets this month. They’ve also reduced the chances of future increases, figuring that even if the Federal Open Market Committee approves another quarter-point move higher on Dec. 19, there only will be one more before it stops.
‘“How the FOMC chooses to react will greatly determine whether the expansion continues or rolls into recession,” Steven Blitz, chief U.S. economist at TS Lombard, said in a note. “The choice will be to pause: there is no inflation surge to chase down and there are headwinds aplenty.”’
The US Fed is probably going to raise interest rates tonight.
It could be the last rate rise for some time, as well…
That could be bullish for gold.
Remember, when interest rates went higher for the first time in a decade during December 2015, punters panicked. The stock market dropped and the Fed backflipped. It originally intended to raise rates four times during 2016. But, thanks to the stock market correction, the Fed turned more dovish in January and didn’t raise rates until December.
Gold went through the roof at the time.
I remember clearly.
I was short, expecting a false move to the upside.
It cost me a fortune.
But, only a fool makes a mistake more than once!
I’m definitely not on the short side today!
It’s time to buy ― not sell
The stock market has been weak lately and the US Fed is becoming more cautious. The combination has sent gold higher in recent weeks. History could be repeating. I believe, if the Fed’s meeting notes read dovish tonight, gold could skyrocket into next year. A year-end close above US$1,310 per ounce would be a very bullish setup for gold.
Indeed, there’s no guarantee that will happen. But, considering my current analysis of a potential slingshot playing out into 2020, I believe it’s the right time to buy gold stocks today…before the sector potentially takes off.
The yellow metal might grind higher into year’s end.
And explode higher next year…
Who knows what happens.
But the story looks good for gold ― and by extension gold stocks ― today.
Unfortunately, few people have the guts to buy in a hated precious metals environment.
Most people like to buy what’s hot, instead of what’s not hot. Yet, the big bucks are often made buying low and selling high.
Now that doesn’t mean you should rush out and buy any odd stock.
Just because something is cheap, doesn’t mean it can’t get cheaper!
You should buy the most undervalued gold stocks on the market ― those with the most potential. I’m talking about the stocks trading under the radar today, which could run hard next year.
Look, admittedly, these stocks aren’t easy to find ― especially in this tough market.
That said, given my experience as a resources analyst, I have spent months doing the hard work for you. I believe, given my research, I have found the three best gold stocks on the ASX today. If gold takes off as expected, these stocks could make you a fortune next year. To find out more about these stocks, click here.
Resources Analyst, Markets & Money