The incredibly positive price action of many gold stocks relative to bullion continues to occur on days when bullion falls hard against the dollar, and when the stock market gets hit. That’s impressive.
There’s a fabulous inverse head & shoulders bottom in play.
I coined the phrase, “safehavenization of gold stocks”. This is a developing theme in the West, where money velocity reverses, inflation rises, and corporate earnings growth fades.
In this environment institutional money managers begin to move their focus away from growth stocks and towards value, defensive stocks, and finally to gold stocks.
Corporate earnings are still incredibly strong, as I predicted they would be in 2018 in this stage of the business cycle.
They are strong, and inflationary! The other main inflationary forces in the West are tariffs and a Fed policy that is pushing money into the commercial banking system.
Like Jay Powell, I’ve cautioned investors that inflation from tariffs takes time to appear. Just because it’s not here yet doesn’t mean it isn’t coming, and more tariffs could set off major alarm bells amongst institutional money managers, analysts, and economists.
When I first began predicting a taper to zero, rate hikes, and quantitative tightening (QT), most gold market analysts thought QE to infinity was here to stay. They were dead wrong.
Now, I’m warning those same analysts that Jay Powell is a rate hiking steamroller. He doesn’t “blink” just because a US stock market price chaser feels sad when the US market falls.In the face of peaking earnings and skyrocketing yields, the stock market is almost certainly in danger of suffering a major decline.
Jay Powell is not going to stop hiking in the face of 20% corporate earnings growth this quarter. He’s not going to stop with rates and unemployment both still at historically low levels. He’s also not going to alter the QT program that Janet Yellen laid out for him years ago.
