Gold Stocks: The New Safe Haven

Will this Friday’s US jobs report be the catalyst that sends gold above the key $1370 resistance zone and ushers in a new era of institutional enthusiasm for gold stocks?

Double click to enlarge.  

The US stock market suffered yet another “cardiac arrest” moment yesterday.   

Market breadth has thinned horrifically, and the low rates and QE that have incentivized corporate buybacks have been replaced with rising rates and QT. That’s akin to replacing a firetruck’s water with gasoline.

I’ve outlined the case for a possible minor rally in April from current price levels, but the market is so weak internally that it is risk of a much bigger cardiac arrest event. 

I don’t think Jay Powell will announce a rate hike at the early may Fed meeting, but he might. If he does, stock market investors should be ready to trade in their “Sell in May and go away” mantra for… “Sell in May after getting blown away by Jay.”

If he wants to do four hikes in 2018 but avoid doing a hike in the September stock market “crash season” month, he is likely to seriously consider doing a hike in May. Are investors prepared for such a surprise? If they own lots of gold, the answer is yes!

So far in 2018 almost eighteen billion US dollars in institutional money has flowed out of the main S&P500 ETF. This market is very sick, and getting sicker. 

The bottom line: US stock market rallies should be sold and the proceeds should be placed in cash, gold bullion, and gold stocks.

Double-click to enlarge this horrifying T-bond chart.  

On a day that the Dow Industrials fell more than 700 points at one point, the T-bond could barely rally at all.

Institutional money managers and sovereign wealth funds are beginning to realize that rate hikes and QT are a tremendous headwind to the US government’s ability to finance itself.