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In 2016, two powerful fundamental forces drove the rally in gold prices:
Force #1: Negative real interest rates, as inflation accelerated while bond yields remained near record lows, and …
Force #2: Massive money printing, not by the Fed, but by the European Central Bank and Bank of Japan.
This year, political concerns are Trumping the fundamentals, literally, and pushing gold prices higher amid growing policy uncertainty here in the U.S. and especially in Europe.
Here at home, we have a new president who has outlined some very pro-growth policies, but Trump has been short on the details. And the devil is always in the details. Meanwhile in Europe, Brexit is moving forward as the U.K. prepares for life outside the European Union.
And major elections taking place this year in France and the Netherlands will create even more populist pressure for others to exit the EU, and pronto. Markets are already getting nervous about the growing wave of populism around the world, and that’s keeping a firm bid under gold.
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So far this year, gold is pulling off a repeat performance of its trend in 2016. In fact, if you compare the trend in gold over the past six months, to the path it followed last year, the pattern looks eerily similar.
Of course, history never repeats exactly, but it often rhymes. If this pattern holds up — and my own neural net AI forecast charts suggest it will — then I expect gold to enter a mostly sideways trading range, including a correction in the months ahead, which could retest the $1,200 level or a tad lower on the downside.
The real story, however, is not in the yellow metal itself, but in the action of gold mining stocks. I expect this is just the beginning of a major move higher for gold and silver stocks — especially the smaller, junior mining shares. Gold and silver stocks should easily outperform precious metals’ prices to the upside in the years ahead, as gold inevitably skyrockets to $5,000 or more.
In fact, the senior mining stocks could outperform by 5- or even 10-to-1 over the price of gold, itself. And select junior mining stocks will really shoot the lights out, easily gaining 20-to-1 or even 50-to1 over the yellow metal.
Right now, investors have already caught on to the outperformance of gold mining stocks, making this a dangerous time to put new money to work in the miners. Let me explain why …
Last year was a good year for gold ETFs, with investors piling into these funds. Record net inflows of $24 billion during 2016 surpassed the previous high of $22 billion in 2009, even after flows reversed briefly post-election, with $8.4 billion of outflows in November and December 2016.
In January alone, another $320 million flowed into ETFs that track the price of gold. And the VanEck Vectors Junior Gold Miners ETF (GDXJ) attracted even more, $650 million of net money flows over the past month.
The trouble is, retail ETF investors are almost always late to the party. And they’re likely piling in now, just before gold enters a corrective phase, as I have forecast.
Bottom line: Expect a better buying opportunity in gold and mining stocks AFTER a near-term correction, which should take place between March and May.
Best wishes,
Larry
P.S. “Stock market tsunami” to wipe out HALF of America’s wealth:Â Shocking free video reveals what you must do immediately to keep your wealth safely growing. Watch it now before it’s too late.
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
{ 22 comments }
So… for those us that are in an ETF, such as GDX, should we sell some covered calls $5 or $10 below the current strike price with an expiration date of Sep or Oct?
when are you going to allocate a section for canadian investors.
Larry,
I just read an interesting analysis relating the price of Silver to the Zinc prices and possible increase in zinc mining which would add to the supply of silver lowering it’s price. What do you think about this logic?
“”A new study suggests the metal’s good run (silver) may be coming closer to the end. In a research note, Capital Economics, says silver may fall victim to the rally in zinc (up 94% over the past year) and lead (+45%) due to the fact that silver as a byproduct of mining these base metals is the biggest source of supply. Only around 30% of annual supply comes from primary silver mines while more than a third is produced at lead/zinc mines operations and a further 20% from copper mines.
Zinc’s rally from multi-year lows were on the back of major mine shutdowns with total production going offline since 2013 of more than one million tonnes.Commodities economist Simona Gambarini says on paper there could be an even bigger decline in output this year but “there is a risk that further down the line, some of the production might come back owing to higher prices”:Indeed, several zinc miners have already announced their intention to restart some of their idled operations over the coming months and with zinc and lead prices having climbed further since the start of the year, we think that other miners might follow suit.
Capital Economics predicts an end-2017 price for silver of $14.50. That’s a nearly 20% fall from today’s price. For end-2018 the forecast is for silver trading at $17.50 per ounce.””
The neural network AI forecast charts mentioned in the article actually forecast a big surge from now into March-April, but Larry says that now is NOT a good time to get into the market! What gives? Doesn’t Larry have any confidence in his forecast charts?
Brian I was thinking the same thing. Larry do you now have new neural network charts or why doesn’t your prediction match the last charts you showed?
Would love to hear more about new Canadian mining companies that are coming into the market now and trading as ‘pink sheets’ & ‘penny stocks”. There are a number of major gold discoveries taking place. Do you have any information?
On Jan.17 you forecast gold to bottom on feb.21 and then rally into March-April. As Brian Farmer asked… What gives?
Larry you’re predictions confuse me. Should we expect a gold/silver rally into March-April or just sideways action and then a correction? Mining and royalty stocks have been getting kind of hammered over the past 2 weeks even though gold price hasn’t really declined. Is that a leading indicator of bad medicine??
I agree with Ed D.
Larry said gold would start to go up today.
So I invested. No we WHAT?
Larry, eventually you will be right. I just wish your timing was better.
Exxon has just had a massive discovery of
oil off the coast of Guyana . One Billion
barrels!!!
Guyanese ) is now trading at $0.005 cts
Per US $
Will this discovery make the
Guyanese $ a good buy at this time ?
Ed, Brian. Yea, Im confused too for same reason.
Larry? Good questions…
I think I’ll wait until a correction is on the books….then make a move.
About two weeks ago you showed a 4-5 year AI gold chart with a major high point on July 1, 2017. HAS THAT CHART CHANGED?
what is issue with AUY why is it falling even when gold is rising
2-23 gold up 10.00 ,gold mine stocks barely move. 2-24 gold up another 7.00 gold mine stocks reversing same for silver. What gives ?.
just a guess, but I think 1250 is a resistance level and investors are waiting to see if gold holds above that price before buying in.
Craig ,
fast forward to Feb.27 CRASH !!! Miners ran up to fast compare to gold – needed to be corrected – done
Timing is everything and I am confused by what seem contradictory predictions.
Larry: Clearly there are a number of excellent questions being asked of you. To be honest my expectations as a consequence of your previous charts are not being met. I am very confused.
I strongly recommend that you make your charts easier to understand and with dialogue from you, in order to help your subscribers.
If other subscribers are any way like me, then we see gold/silver/junior miners/ larger miners as being the road to some profits between now and 2020. We all understand that it is not going to be straight up – for me, better charts that are more understandable along with your dialogue is what I need.
John Kemp
Just started getting your newsletter. What is rule 214(a) (5)? Is it a sham? If not how do you apply?
I’ve just read of the sad loss of a very respected man, Larry will be greatly missed by his
readers. I’m just looking at his wave theory it looks like a good path to follow.
I am from The UK, living in Portugal, its good to get some good honest thinking from the
outside world.
I wonder what a collective group of American financial experts think about a crash in
European Union by next year? and will America re- adopt the gold standard any day soon?