The funny thing is that gold and stocks currently seem to like the same thing: more money printing.
Treasury bonds keep falling in rates and we’re seeing a slowing global economy despite Trump’s tax cuts and central banks leaning towards easing. That has hurt stocks a bit, as has the recent near break-off in trade negotiations with China. Markets were fearing a currency war now that the trade war is at an impasse.
So, no surprise gold has been rallying here. But for stocks, the surprise is that they’re holding up as well as they are considering the slow growth foreshadowed by the bond markets and trade impasses.
Hence, my preferred scenario for stocks — with a minor pullback here and then a continued strong break up on the Dark Window scenario — still seems possible, especially with today’s strong rally.
The rally we saw was spurred largely by Trump’s decision to delay a few tariffs and put trade negotiations back on officials calendars in two weeks. Stocks loved that of course, and gold didn’t.
Stocks In the spotlight
I have warned that stocks look to be at a critical point; they could break up sharply towards 10,000 on the NASDAQ or down towards 5,700 — quite a spread!
Given that stocks have held up as well as they have amidst the bad news on China and the bearish bond markets, we could be about to see that upside breakout soon now that the news has suddenly switched gears towards a trade deal instead of currency wars.
I believe the breakout point would be around 8,500 on the NASDAQ and 27,500 on the Dow.
However, if stocks end up breaking down further, then the two targets continue to be about 7,290 on the less bearish side, and all the way down to 5,700 at the extreme.
The trends are more clear and bullish on stocks today, and may get clearer on gold quite soon. But this could be it for gold.
In Australia, money has been flowing into companies like Newcrest Mining Limited [ASX:NCM] and Saracen Mineral Holdings Limited [ASX:SAR].
Both of these companies are trading at earnings multiples upwards of 50x.
This is downright nuts.
They aren’t tech stocks with oodles of future growth projected — they dig things out of the ground.
This signals to us that trade in Aussie gold stocks is getting overheated and ripe for correction as the Donald angles to ‘save Christmas’ with a trade truce.
We’ll keep watching and guiding.
For The Rum Rebellion
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