Sell Your Gold and Buy These Resource Stocks

Despite the scaremongering…

Despite the uncertainty…

And despite the hundreds of bullish analysts around the world telling you to buy…gold’s dream run appears over.

The precious metal surged US$100 last Friday, hitting a high of US$1,360 per ounce. Yet, with the Brexit shock in the background, gold has plummeted. It’s trading at US$1,322.59 per ounce today.

With the writing on the wall, gold should hit — at least — as low as US$931 per ounce in the months ahead. While gold bugs will lose more than just their shirt, I suggest buying three resource stocks. These stocks could make you huge gains in the months ahead.

I’ll explain…

The tape never lies

Before I start, I should make something clear. I have nothing to gain by being bearish on gold. Let’s face it; I get paid to sell investment newsletters. If I was bullish on gold, my readership would be going through the roof. Yet, despite this fact, and my bosses’ frustration, I can’t help but be honest.

Unlike the majority of investment banks, stock brokers and other newsletter writers around the world, I refuse to be bullish just for the sake of selling another newsletter or stock tip. I write straightforward, honest analysis. I never beat around the bush. I run the largest independent resource investment newsletter in Australia, and my subscribers expect that honesty from me.

Based on multiple fundamental reasons which I’ve outlined to you over the past few months, I’m short term bearish and long term bullish on gold. I’d like to draw your attention to a couple of charts which back up my fundamental research. As the saying goes, the tape never lies!

See the weekly chart on gold below:

weekly gold chart

Source: Resource Speculator
[Click to enlarge]

Despite the day to day news, which is just noise, the weekly chart will show you the trend. The chart above shows that gold is not in a bull market. It’s merely in an upwards trend from December last year.

Digging a bit deeper, gold hit the blue resistance line on the chart above last week. The resistance dates back to the 2011 high of US$1,900 per ounce. The pink line shows the support. It lines up with the 2011 low of US$1,307, the 2013 low of US$1,180, and last year’s low of US$1,047 per ounce.

It appears that gold is merely moving up and down between support and resistance. Based on this evidence, despite the drama and noise, I wouldn’t get too excited.

Beware of the trend

Check out the monthly chart:

monthly gold chart

Source: Resource Speculator
[Click to enlarge]

The monthly chart also shows you the main trend, eliminating even more noise. In other words, you don’t see the week to week volatility.

The chart above shows you that gold is in a long term bull market. Yes, you read that correctly. The long term bull market is shown by the green line, which dates back to the breakout in 2002. It also shows that, despite the recent uptrend, gold is in a short term bear market dating back to 2011.

Assuming the US dollar bull market starts to take off, which looks more likely now following the Brexit, gold could see huge pressure in the months ahead. If you own gold stocks, watch out. I expect them to crash to cents on the dollar. When this happens, I’ll recommend the best of the lot to Resource Speculator readers.

Remember, despite the recent correlation, there’s typically an inverse relationship between the gold price and the US dollar. With the euro and pound starting to sell off, the US dollar looks set to skyrocket. When this happens, resource prices (set in US dollars) should start to pull back. I expect the Australian and Canadian dollars — commodity currencies — to plunge. This could unleash a massive bull market in the US dollar — the world’s reserve currency.

Before you know it, emerging market currencies will come under pressure. This should spark a bloodbath across the financial world. The Australian reported:

Since the financial crisis, there has been a massive increase in global leverage, with much of the increase in debt levels attributable to developing economies and much of that debt denominated in US dollars.

According to the Bank for International Settlements, the stock of US dollar-denominated debt of non-banks outside the US is now about US$9.7 trillion.

As the dollar strengthens, the cost of servicing and repaying that debt inflates.

From recent experience, we also know that when the dollar rises it is associated with greater financial market volatility, less risk taking and lower commodity prices.’

It doesn’t look great for gold bugs…

The Japanese Yen probably won’t be in favour. The country — the most indebted western nation on a debt to GDP basis in the world — has struggled with three decades of deflation. It’s trillions of money printing and negative interest rate policies should result in a major default.

Despite the countless number of bullish articles on gold, the writing is clearly on the wall. Gold is an asset, not a currency. For this reason, it has crashed during nearly every financial crisis that dates back to 1971. I explained this story to Resource Speculator readers at length in late February and early March. If you want to read those reports, click here.

I hate to say it — and it won’t make my newsletter readership any bigger — but I wouldn’t be surprised if gold moves sharply lower in the months ahead. It just hit the blue resistance level, and couldn’t break out. It must close above the blue resistance line to signal something more sustainable.

With plenty of arguments stacked against the yellow metal, I won’t be surprised if the trend flips shortly and gold heads towards the pink support level. A weekly and monthly closing below that level should indicate that it could drop fast and hard. My target of US$931 per ounce — a technical support level lining up with the green trend line — is looking good.

To buy gold at these levels, you’d have to be betting that a lot more goes wrong…before the US dollar bull market unleashes. I’m really not sure that’s going to be the case. When the sovereign debt crisis hits, history shows that institutional capital will move into the US dollar, and not gold. The dollar is the world reserve currency for that reason.

The ship is steering towards the largest financial meltdown of all time. All asset classes — gold, stocks, commodities, property, bonds — should get hit in the early days of the crisis. You will need both skill and experience to survive and prosper. I have a plan for Resource Speculator readers to prosper. Do you?

When resource and gold stocks start to crash harder, I’ll strategically recommend the best of the lot. Being a contrarian resources investment newsletter, with a strong top-down approach, Resource Speculator readers should make massive profits in the years ahead.

While we wait to pick up the best resource stocks for scraps in the dollar, your best bet is sticking to speculative stocks. Remember, speculative stocks can make you huge gains, despite market conditions.

In my view, there’s no better place to make big gains than in resource stocks this year. For this reason, I wrote a FREE REPORT titled ‘Three ‘Bounce-Back Mining Belters’ to Buy NOW’. Implementing my top-down approach, I’ve found three resource stocks that could make you massive profits in the months ahead, despite the current market conditions.

You can read about those stocks today in your FREE report, here.


Jason Stevenson,
Editor, Resource Speculator

Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money