Why History Says We Should Get Ready To Profit From Gold Stocks…
Stocks performed terribly last year — the worst year since 2008. That’s not news to anyone.
What I haven’t seen talked about, however, is the breakdown between stocks and gold…
Last year, we had inflation reach 40-year highs. We had Russia invade Ukraine and nearly kick off World War III. We had the near-unanimous consensus that we were or would be entering a recession.
Historically, gold prices soar with that sort of backdrop. Instead, gold ended 2022 pretty much flat. In other words, it didn’t go anywhere.
This is a surprise. It potentially spells a breakdown in the historical relationship between gold and certain macro factors. Gold is typically seen as a “safe haven” when there’s uncertainty in the air. And last year, we had nimbostratus clouds hovering above us.
If gold couldn’t rally through record inflation and global conflict, when will it?
Some believe that gold has fallen to the wayside because it’s not coveted by the younger generation — namely Millennials — like it is with older generations. I’ve seen some calling for gold to collapse by double digits this year.
Now, I always like to say that I don’t have a crystal ball. Gold could certainly end the year down. But right now, I’m seeing signs that the exact opposite will happen — that we could have a powerful rally in gold and gold mining stocks.
What History Tells Us About Gold’s Potential
We know that gold — and gold miners — didn’t have a spectacular year last year. We already covered that. But since its September lows, gold has been on a strong stealth rally. Just look at the VanEck Gold Miners ETF (NYSE: GDX) — a collection of gold miners:
As you can see, gold miners are up a staggering 40% since the end of September. Is this the start of something bigger? Only time will tell. However, I want to drive the gold thesis home a bit by showing you the startling similarities between stocks and gold…
We all like to relate current times in the market to previous times. It helps us explain and clarify what’s happening and what might happen. Of course, no two times are the same. But as Mark Twain is credited with saying, “History never repeats itself, but it does often rhyme.”
With the collapse in tech stocks, we are seeing a lot of references to the 2000-2001 dot-com bubble. So, let’s roll with it…
In March 2000, the S&P 500 peaked. Roughly one year later, it was down 27%. Gold peaked in February 2000 and tumbled 20% over the following 14 months.
Fast-forward to the present day. Stocks peaked in January 2022, and at their bottom in October 2022, the market was down 27%. The price of gold peaked in March 2022, and by October, it was down 20%…
I’m not sure about you, but outside of being a couple months off, that is pretty darn close to the present day’s action.
Now, if history is about to “rhyme,” then what I’m about to show you will be shocking. Even I had to lower my standup desk and sit down for this one…
One hint. Good for gold. Bad for stocks.
During the dot-com bubble, stocks went on to fall even further. From their peak in March 2000 to the bottom in October 2002 — 2.5 years later — stocks lost 50% of their value. But gold prices bottomed at that April 2001 low and rallied 27% as stocks continued to find their bottom.
Yes, I realize 27% isn’t exactly a life-changing return. But this is the price of physical gold we are talking about. I’m not recommending going out and buying a bar of gold.
You see, when the price of physical gold climbs, that rally is amplified in gold mining stocks. Unfortunately, ETFs were still in their infancy during the dot-com bubble. The first gold ETF came out in 2004. But mutual funds have been around forever, so I can still show you how that 27% rally in gold prices translated into miners.
Remember, gold did well compared to the stock market: 27% versus a 50% loss. But the US Global Investors Funds US Gold (USERX) returned an incredible 168%.
Now that’s a helluva return. Imagine back then when people were betting big on risky internet startup companies that made no money and lost a bunch of money (sounds familiar). And here you are more than doubling your money.
I want to show you one more time where we are today with this relationship between gold and stocks.
Action To Take
Ultimately, I have no idea what will happen with stocks and gold. But if one wants to draw similarities to the dot-com bubble and today… well, I can certainly see them.
In the end, what really matters is that if we want to profit, we need to follow the momentum. And right now, there’s a stealth bull market in gold and gold miners. If it turns out to be nothing, we will cut our losses and move on. But if history does indeed rhyme, then we could be in for some massive gains.
In the meantime, my team and I have just released a report of “shocking” predictions for 2023 (and beyond)…
This report is easily one of the most hotly-anticipated pieces of research we release each year. And if history is any guide, it could be one of the most profitable things you read all year…
In my latest presentation, I’ll tell you how you can receive an in-depth report that reveals the research and analysis that went into these forecasts. I also describe the specific investment opportunities which can help you reap exceptional profits from each one of my predictions.