The precious metals sector and gold stocks in particular have been extremely cheap for several years. The reason it has remained that way is Gold has not been able to begin a bull market because the fundamentals have not been in place.
The driver for bull markets in Gold is declining real interest rates. The catalyst for that is either accelerating inflation and rising inflation expectations or Federal Reserve interest rate cuts.
In studying the current context and Federal Reserve policy history, we became convinced that the historic buying opportunity in precious metals will come around the time the Federal Reserve cuts interest rates.
We studied the history of gold mining stocks and Federal Reserve rate cuts going back 60 years.
During that period, there have been 12 rate cut cycles.
In 10 of those 12 cycles, gold stocks gained a minimum of 57%, an average of 185% and a median of 115%.
The two times they did not gain, (Gold was crashing in 1981 and inflation was skyrocketing in the mid 1970s) are nothing like today. So we can forget about those.
The time to act is finally here as the Federal Reserve could cut rates multiple times in the second half of 2019!
And the good news is that although gold stocks have started to move, they remain extremely cheap.
Let me show you proof.
The first chart shows gold stocks relative to Gold. The ratios are currently close to the cheapest ever.
The next chart shows how cheap gold stocks are relative to the stock market. Again, the ratios are close to the cheapest ever.
Finally, take a look at the S&P TSX Gold Index and its rolling return over various time periods.
Consider how oversold the gold stocks are on a very long-term basis. The only comparable periods are 2000 and the late 1950s.
Moreover, the index is trading around the same level it was 38 years ago! You have to go back to the early 1970s and early 1960s to find something similar. Those were spectacular buying opportunities!
Gold stocks are extremely cheap on a historical basis. At the only other points in history when they were this cheap, they delivered spectacular returns over the next 10 years.
And now we can say what we could not say a year ago or even a few months ago.
The Federal Reserve is going to cut interest rates this summer. It is imminent and it is the fundamental catalyst that has been missing in recent years.
We should note that during the first rate cut cycle in the 1960s, gold stocks gained 311% and during the first rate cut cycle in the 2000s, gold stocks gained 600%.
This is why I have focused my career on Gold and the junior mining sector.
Gold and gold stocks are poised to perform very well over the next decade but your eyes should be on the junior mining sector where select companies could rise 5-fold, 10-fold, 20-fold over the coming years.
I'm Jordan Roy-Byrne, CMT, MFTA, the editor and publisher of TheDailyGold Premium. I'm a Chartered Market Technician, a Master of Financial Technical Analysis, a member of the Market Technicians Association and have spoken multiple times at major mining investment conferences.
I invest my own money and inform subscribers as to what I am buying and selling. My model portfolio is a real brokerage portfolio, which provides complete transparency and accountability to subscribers.
Since I started my newsletter in 2009, my portfolio has more than quadrupled. That is during a period when GDX and GDXJ have performed horribly! We have outperformed the sector by 675%.
The good news is the Federal Reserve is going to cut interest rates and that means it should be easier to make money than it was in recent years. However, making money is not enough. You have to make it and then keep it.
I do not want to share all my secrets but let me provide information relating to our process.
First, we look for the junior companies that own the projects a larger company would want to buy. In short, these are projects with multi-million ounce potential and high margin potential. Second, we want to buy value. The better values we can find, the less downside potential and therefore more potential upside there is.
With respect to the portfolio, we want to size positions correctly. We seek to overweight the positions we are most confident in while underweighting higher risk but higher potential companies.
Finally, there are important rules with respect to taking profits and selling. We always want to cut our losses before they become bigger losses. We use a mental stop loss of 20% on our positions. Also, we should let winners run but periodically "trim" these positions when they become too big.
"I have been following Jordan’s work for the past six years and can say he is absolutely one of the best analysts in the field. I am continually impressed by the volume and quality of content Jordan puts out on a weekly basis. His reads on both the fundamental and technical picture allow readers to understand the market and his company analysis and stock selection are excellent. He is one of the best in this industry at finding stocks that can rise 500%-1000%. Understanding the nuances and particulars of this sector requires a steep learning curve. It can take years to fully acclimate yourself. Best to learn from Jordan and let him do the work for you!"
— Collin Kettell, Partner & CEO Palisade Capital
"In an industry full of snake oil salesmen and fairy tale promises, Jordan Roy-Byrne's advisory services and deep comprehension of the precious metals market is second to none. He understands that markets have cycles, in particular highly volatile gold mining shares, and helps his subscribers navigate pitfalls by selecting the right securities which can dramatically outperform while cutting losses quickly. Highly recommended service for those with desire to invest in the gold mining sector."
— Tiho Brkan, Fund Manager for High Net Worth Individuals
"I have subscribed to many investment services over my lifetime. I can honestly say Jordan Roy-Byrne has developed not only one of the most analytically accurate, but also has hit the high water mark by making his analysis feel personalized. In addition to a detailed weekly report, he often sends additional emails with daily observations of not only the physical metals and miners, but also related metrics such as the market and currencies. His service is a great integration of history and future probability that has not only helped me make money, but also avoid losing. It truly is a 5 Star Service at a great price."
— Donovan P. CPA & Attorney
There is no catch. For less than $1/day you get my high quality, actionable research and you can invest right alongside me.
The gold stocks could explode higher over the next 12 months and this could be your last chance to invest at historically cheap prices.
"I am simply a pure market-timer for a broad basket of gold stocks and precious metals. Jordan, on the other hand, has provided superior STOCK-PICKING abilities over the longer-term. I am familiar with most gold stock subscription services over the past 30 years. I rarely provide endorsements of any kind, but Jordan's ability to analyze individual gold/silver stocks has been among the top 5 services over the past decade. First and foremost, I respect his integrity. "
— Dr. Jeffrey Kern, Developer of SKI Gold Stocks Trading System