Two Thoughts for the Second Half of 2019

Gold Market Discussion

Thought One:  We added a short postscript to our 4/22/19 post Temperature Rising in the Persian Gulf that read:

“NOTE:  So far this year, any pullback of gold below $1,300 has been a favorable opportunity to add to your holdings.”  

It’s always risky to make a call like that because we don’t want anyone to fail to acquire gold because they waited for a price pullback.  But there are often trading patterns that appear – after a lifetime in the business – predictable.  

For example, after a sharp rise, the only way for “long” futures markets traders to realize their profits is to sell.  When a market falls, those with “short” positions take their profits by buying.   Accordingly, we are never surprised to see a pull-back, no matter how brief, after a good run, or a bounce up after a market moves lower.

Still, modesty demands that we chalk up to good luck that our clients had several opportunities to buy gold below $1,300 as we suggested before the bull market sprang to life in June.

We have just experienced a powerful wave up, in a very short period.  From $1,267 on April 29, gold roared up to more than $1,440 in June.  On July 1 it closed at $1389.     

We would like to suggest now that any pullback to $1,400 or below is a good gold buying opportunity.  But be warned:  it may not last.  There is a very real and broad-based rotation into gold taking place at the level of governments and major institutions globally.  

Something big is happening.  Take advantage of the price break while you can.  

Thought Two:  Now that we have entered the second half of 2019, it looks increasingly apparent that the rest of the year will be very painful for stock investors.  We are now in the longest economic expansion in history, tepid though it has been.  

David Stockman makes the point that during the past twelve years the stock market’s growth has outpaced the growth of the main street economy by six times.  

That is unsustainable. 

Stockman asks how the big shots at the Fed could miss this and countless other data points that confirm the basic disconnect between the state of the underlying economy and the market.

The answer is simple:  They always miss it.  

One portfolio manager interviewed by Yahoo Finance said investors stand to get “clobbered.” 

We agree and will have more to say about it in the weeks ahead.


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