Bob Hoye, market historian and author, founder of chartsandmarkets.com, offers market commentary on the recent increase in market volatility from his home office in Vancouver, B.C.
- Our guest is observing heightened financial market risks.
- The Fed could soon lower rates - T-bill rates may have peaked and could head lower.
- Gold performs consistently throughout financial market bubbles.
- Gold's real-price tends to move up following market bubbles, a good sign.
- Expect gold to outperform on a relative basis.
- A multi-year bull market in the XAU and GDXJ could outperform the S&P.
- Bob views the current global economy as a "Post-bubble contraction."
"The performance of gold, two previous bubbles, has been consistent. But there was a long time when the senior currency of sterling was convertible into gold, so there was no price change. So you deflate the price of gold. And then what you do is you recognize the pattern that gold's real price goes down in the final year or so of a bubble. Which happened. And then gold's real price turns up - which is happening.
Now I prefer to look at the gold divided by the [Commodity Research Bureau Index] CRB, because that represents the cost of mining. So if gold divided by CRB is going up, it means the cost of mining relative to the bullion price is improving, enhancing profitability of gold mining."
And it gets even clearer when you take gold and divide it by crude oil and we all know that energy costs about 60% of mining. So that both of those have now turned and are in [the] early stages of a major uptrend. So this is where I preach the new world in gold stocks - it's no longer the mantra of "dollar down, gold up, gold stocks top." That is speculating in foreign exchange markets. The new world (which is actually old world 1930s) is that earnings go up, profit margins go up for gold miners, earnings trend up - so you end up you're buying a stream of increasing earnings, which is investing. And no longer in the old, beat up speculation in foreign exchange fluctuations, which is mainly dollar down.
So the dollar doesn't matter, and also in a post-bubble contraction, the senior currency remains chronically strong; it drives everybody crazy. So this is where you then make money in the gold sector in a post-bubble deflation; it's because the gold miners make money, because everything falls relative to the price of gold. So this is where we really like the gold sector for the long pull."
Goldseek.com is excited to add music from the remarkably talented musicians, Ms. Nancy Sidley and Cody Killian, from the IMH church in Hayesville NC, under the purview of Father Alejandro "Alex" Ayala.:
Immaculate Heart of Mary Catholic Church - Hayesville, NC