Story Highlights
- Back in October 2018, gold hit a 20-year low from its high in September.
- Now gold stocks are up 18% from their 2018 low … and they’re set to rally for one big reason.
- Read on for the three ways to invest in gold and protecting yourself from what lies ahead.
On January 1, I made a bold claim.
I said that not only would the market rally, but gold would too.
You see, December 24, 2018, marked a low point for the stock market. The S&P 500 Index was down 20% from its September high.
All because of investor fears over the trade war and rising interest rates. And while it was an understandable reaction … it was overdone.
That’s why I believed that both the market and gold would rally in the months that followed.
After all, people flock to safe havens during market turbulence.
Well this year, we’ve seen both areas boom. The market is up 20% since the sell-off, while gold is up 18% from its 2018 low.
Now I have a new message for you: Something just ensured gold’s rally isn’t over. And there are three great ways to supercharge your gains from its continued rally.
Reports of Gold’s Death Are Greatly Exaggerated
Gold demonstrated a strong performance for an asset class that’s been labeled “dead” by some talking heads.
Take a look at the chart below:
During the cryptocurrency bubble last year, speculators claimed that gold’s reign was over — and that volatile cryptos such as bitcoin would replace it as a hedge against market fear and inflation.
Hedge funds piled onto the bearish view. The Commitments of Traders chart tracks the sentiment of money managers on commodities such as gold.
In October 2018, the yellow metal hit a 20-year low. Money managers had never hated gold as much as they did in the 21st century.
But for the only asset that has survived since ancient Mesopotamia, this was just another buying opportunity. And now we’re seeing another one…
Rising Gold Prices Reach $1,400
We knew it was a great time to buy gold.
The new-year rally in gold forced funds to close their short positions, pushing up prices even further. That helped the rapid price move. Gold rallied 10% in a matter of weeks.
And gold continued moving higher — it’s now trading above $1,400 per ounce.
But now gold’s run is taking a pause. The Federal Reserve insisted that only one rate cut was needed on Wednesday. With lower interest rates, investors are less likely to hold U.S. dollars.
Gold does great against a weakening dollar. And that means gold is still a good hedge.
3 Ways to Capitalize on Gold’s Rally
Gold shines as an insurance policy against market anxiety. So, here are three top ways to make sure you don’t miss its rally:
- Hold physical gold. Holding a modest position in gold of 5% to 10% of your portfolio is an excellent insurance policy against a weakening dollar and a volatile market.
- Invest in gold exchange-traded funds (ETFs). Consider the SPDR Gold Shares (NYSE: GLD) as an easy way to add gold exposure to your portfolio.
- Invest in gold miner ETFs. To capture even bigger gains on gold’s rally, consider investing in the VanEck Vectors Gold Miners ETF (NYSE: GDX).
See, gold miners leverage the price of gold — and that’s great for investors.
It costs them about $1,000 to produce an ounce of gold. So, since gold sold around $1,200 an ounce last year, they made about $200 per ounce.
At current prices — around $1,400 — miners now make $400 in profit.
Their earnings essentially doubled with only a 17% move in the price of gold! That’s why the GDX is up 26% year to date!
My colleague Matt Badiali also has some exciting gold-related news to share with you. Stay tuned for his article on Monday.
We’ll be keeping an eye on this gold rally in Winning Investor Daily, so be sure to follow along as we bring you more ahead-of-the-curve analysis.
Good investing,
Anthony Planas,
Internal Analyst, Banyan Hill Publishing
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