The Bull Market that Went Unnoticed

Yes, precious metals are actually in a bull market. If you actually polled the mainstream, you would find few that could even admit it. Its almost heresy if you come from a conventional background. As we now know, conventional thinking often fails miserably. Gold is in the 11th year of its bull market and conventional thinking continues to ignore the obvious.

First, its important to note the current juncture. Gold and Silver, more or less are basically at all-time highs. Silver is if you exclude the final spike and look at the monthly closing high of $35. Meanwhile, the large cap gold stocks as shown by the Barrons Gold Mining Index below, recently broke to a new all-time high. Sure large caps have struggled but they reside in major breakout territory.

Give or take 5% we are basically at or near all time highs. Yet, the masses continue to allocate capital elsewhere. Here is one example. Here is a look at the assets in the Rydex Precious Metals Fund (source: SentimenTrader.com):

Note that the assets are currently ~$199 Million. Several months ago the assets were almost at $350 Million. The peak was at the end of 2009 at $375 Million. This is just one measurement of fund flows but it shows a significant outflow in the last few months, yet the sector is basically at an all time high.

Also, global pension assets are estimated to be $31.1 Trillion. Shayne McGuire, author the book Hard Money; Taking Gold to a Higher Investment Level, estimates that the typical pension fund holds only 0.15% of its assets in gold and another 0.15% in mining stocks.

Needless to say, this is a potentially extremely explosive situation. As this bull market continues, at somepoint the massive herd will gradually pile in. Better to get in ahead of the herd rather than follow it.

Jordan Roy-Byrne, CMT