The Next Gold Bull Market Looms…

Gold had a good start to the year. Punters got excited. But it has pulled back a bit in recent months.

FX Street summed the mood up yesterday:

Gold is freezing beneath 1,300.00 as markets await a notable shift in market sentiment in either direction. Bullish momentum hasn’t materialized, and bearish pressure is beginning to ride high on the charts.’

The market isn’t interested in gold.

But it’s wrong.

I believe now is the time to buy.

I’ll explain…

Digging deeper

Take a look at the Vaneck Vectors Junior Gold Miners Index [NYSE:GDXJ]:


Source:Interactive Brokers
[Click to enlarge]

You can see the junior gold miners surged into the Brexit referendum in June 2016. But British politicians didn’t pay attention to the vote and kicked the can down the road. BBC reported on the latest yesterday:

‘The EU withdrawal bill is the legislation aimed at ensuring the UK has a smooth transition out of the EU, and will mean EU law is no longer supreme in the UK.

‘To avoid a sudden “cliff edge” on Brexit day, 29 March 2019, it would also convert existing EU law into UK law so the government and Parliament can decide at a later date which bits they want to keep or change.

‘The House of Lords has put forward 15 specific changes to the bill, but the government wants to kill off most of these changes.

‘However, numbers in the House of Commons are finely balanced, with the Conservatives not having a majority and needing the help of Northern Ireland’s Democratic Unionist Party to get their way.’

David Davis, Brexit secretary, says this is the final vote. If parliament rejects a Brexit deal, that’s it. He told BCC yesterday:

It won’t start all over again because we’ll be out of time. At the end of March 2019 we leave the European Union, full stop.

‘If they throw it, they throw it out and we’ll have to go away and think about it and come back and make a statement, which is what I’m saying to the House this afternoon. That statement will tell them what the next steps are. What I’m not going to do is pre-negotiate, lay out for the EU, what will happen.’

Let’s agree to disagree…

I’ll be blunt: Britain’s politicians work for themselves ― not the people. They are sending the country back into the dark ages, neglecting the vote. That much is clear. Britain’s politicians want to ‘convert’ existing EU law into UK law.

That defeats the entire purpose of Brexit.

Express.co.uk agreed yesterday (my emphasis added):

The Prime Minister’s EU (Withdrawal) Bill was supposed to be a straightforward piece of legislation cancelling Britain’s membership of the European bloc and smoothing the legal path towards a proud, independent future.

Instead, the Bill has been emasculated beyond recognition by the ermine-clad inhabitants of the House of Lords.

Unelected Remain-backing peers, many enjoying lavish Brussels pensions, have transformed the Bill into a device for diluting and potentially delaying Brexit.

Some clauses added by the Lords have even been drafted in the hope that the departure process can still be averted. One even has the cheek to demand a “meaningful vote” by Parliament before the country finally leaves the EU.

Indeed, aside from the outrageous Bill considered, there’s no need to buy insurance yet. The people have been ignored in the UK. So, despite the gold price holding up, the junior gold miners still haven’t recovered from Brexit’s failure.

Nothing has changed.

But, outside of Brexit, there are plenty of reasons to buy gold. Rising US interest rates, the prospect of a major war breaking out in the Middle East, and a movement towards anti-establishment parties across Europe could all drive gold prices higher.

It’s the perfect storm.

Technically speaking

I believe gold could break out into a bull market later this year. But we need to see new highs on a monthly close, above last year’s high of US$1,377 per ounce, to confirm a bull market. That would signal a new series of higher highs and higher lows. Take a look at the monthly chart dating back to 2005:


Source: Tradingview.com; Gold & Commodities Stock Trader
[Click to enlarge]

The monthly chart shows the major trend in motion. The 2009–11 bull market was defined by higher highs and higher lows, shown by the dark black lines. Take a look at this image:


Source: Meta Binary Options
[Click to enlarge]

The left-hand image shows an uptrend, with higher highs (HH) and higher lows (HL). The right-hand picture shows a downtrend, with lower highs (LH) and lower lows (LL). Now, while we can’t be sure yet, gold may have entered a new bull market in December 2015. Take a look at the monthly chart again:


Source: Tradingview.com; Gold & Commodities Stock Trader
[Click to enlarge]

There’s a good chance the major low could become US$1,037 per ounce in the future. That was formed in December 2015. It happened two days before the US Federal Reserve raised interest rates for the first time in nearly a decade. Gold moved to US$1,374 in July 2016, creating a higher high with the Brexit vote.

It pulled back and hit US$1,377 per ounce last year.

It was a new higher high.

I hope you see what I am trying to say here…

We need to see new highs above US$1,377 per ounce this year. It would signal that gold has entered a new bull market. Once it makes a new higher high, say near the US$1,400 per ounce mark, it can pull back and make a new higher low. That’s the technical formation needed for a bull market.

I’m letting the numbers do the talking — not my opinion. So now is the time to buy the best junior gold miners, before it’s too late. The situation could look very different in a couple of months’ time.

To read about my favourite ‘penny gold’ stocks, go here.

Regards,

Jason Stevenson,
Resources Analyst, Gold & Commodities Stock Trader

 


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:


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