[New post] Why is Gold the Worst Asset Performer YTD!?
User ID posted: " https://www.youtube.com/watch?v=LxaD3vmVUzo Why is gold the WORST asset performer YTD!? by Katusa Research Win an annual subscription: https://join.katusaresearch.com/katus... It was a stunning Sunday selloff that got my attention… Within minutes,"
Within minutes, I sent an email to my team at Katusa Research to standby on alert.
Gold bullion cratered in overnight trading on Sunday, falling over $60 per ounce in a matter of minutes, breaching $1,700 per ounce.
Some are blaming it on thin overnight trading due to the Asian holiday, while others are justifying it with recent economic data.
Regardless it's an uncomfortable feeling for gold bugs…
Watching gold and gold stocks fall while the rest of the market roars higher.
Many of you have seen this song and dance before. Trudged through trenches and held on through bleak times.
A large number of investors are new to the sector…
And it's the first time you've got that white towel firmly in your grips.
This investor was drawn in by last summer's rapid gold price ascent and the incredible gains gold stocks returned in that rally.
That was then. This is now…
While it can change in the blink of an eye, out of all the major asset classes (many bitcoin enthusiasts will remind you), gold is the worst year to date performer.
Weak: What is Causing the Gold Price Decline?
One major seller in thin holiday trading aside…
The real driver of gold prices right now is the state of the US economy and the outlook for growth and inflation.
Strong U.S. employment data released Friday played a pivotal role in the recent price action for gold. #gold#goldprice#goldcrash -------
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The labour statistics point to improving conditions, which indicate a stronger and healthier economy. In theory, a stronger economy should require less financial heroine, meaning less stimulus and money printing from the government and central bank.
For the record, I don't think the Fed intends on changing its key accommodative policy stance anytime soon.
However, as an economy strengthens it incentivizes investors to buy growth over protection.
Eventually a stronger economy could provide a catalyst for real interest rates to move closer to 0%, rather than -1.15% today.
If you're in the camp that one should earn a positive rate of return after inflation on bond investments or at least break even, then you'd be hard pressed to think gold is undervalued at these prices.
It's not what you might want to hear… But the numbers speak for themselves.
The chart below shows every weekly gold price relative to US bond yields adjusted for inflation (Real Yields) since 2006.
By this metric, even if you wanted to break even on your debt investments and earn a 0% rate of return after inflation, gold is overvalued by over $200 per ounce.
See Full Video Transcript Below
Gold, are you scared? It was a stunning Sunday sell-off that got my attention within minutes I sent an email to my team at Katusa research to stand by on alert gold bullion cratered in overnight trading on Sunday falling over sixty dollars per ounce in a matter of minutes breaching seventeen hundred dollars per ounce some are blaming it on thin overnight trading due to the Asian holiday while others are justifying it with recent economic data regardless it's an uncomfortable feeling for the gold bugs watching gold and gold stocks fall while the rest of the market roars higher many of you have been seeing this song and dance before trudged through the trenches and held on through bleak times a large number of investors are new to the sector and it's the first time you've got that white towel firmly in your grips this investor was drawn in by last summer's rapid gold price ascent and the incredible gains gold stocks returned in that rally the that was then this is now while it can change in the blink of an eye out of all the major asset classes many bitcoin enthusiasts will remind you gold is the worst year to date performer that's the major asset class year-to-date returns chart you're looking at right now you got gold just touching negative 10 year-to-date 20-year US bonds negative six percent US high-yield debt about negative one percent look at that far right EU carbon credits up 73 year-to-date and to all my bitcoin friends up 58 year-to-date week what is causing the gold price decline one major seller in the thin holiday trading aside the real driver of gold prices right now is the state of the us economy and the outlook for growth and inflation strong US employment data released Friday played a pivotal role in the recent price action for gold the labor statistics point to improving conditions which indicate a stronger and healthier economy ahead in theory a stronger economy should require less financial heroin meaning less stimulus and more printing from the government and central bank for the record I do not think the fed intends on changing its key accommodative policy stance anytime soon however as an economy strengthens its incentives investors to buy growth over protection eventually a stronger economy could provide a catalyst for real interest rates to move closer to zero rather than the negative 1.15 percent today if you're in the camp that one should earn a positive rate return after inflation on bonds investments or at least break even then you'd be hard-pressed to think gold is undervalued at these prices it's not what you might want to hear but the numbers speak for themselves the chart you're looking at right now shows every weekly gold price relative to US bond yields adjusted for real inflation hence why we call it real yield since 2006. by this metric even if you wanted to break even on your debt investments and earn zero percent rate of return after inflation gold would be overvalued currently by over two hundred dollars per ounce that's what the numbers say well how well does this model work well for the mathletes who follow me an r squared of 0.86 indicates strong power between gold and real yields the next chart you're looking at shows the actual weekly gold prices since 2008 and the predicted price from the model we extrapolated from above that's the value of gold with real yields so the black is the actual price of how gold performed and that yellow is how it should have performed according to the math formula not too bad eh I took a lot of hate from the twitter crowd a few weeks ago when I said we may not like the current price action in gold but we must respect it as it looked like to us that it would go lower from our analysis that was exactly what happened the gold market is a multi-trillion dollar a year industry one seller for a few billion dollars on a Sunday is not going to make or break the sector in the long term but the fact that one seller can influence the price that significantly is assigned a short term weakness again respect the price action and the math and use the information the price action provides to make investment decisions comparing gold's biggest corrections while the recent price action doesn't look promising these drops don't even make the top 20 worst monthly declines for gold what you're looking at now is the table of the largest monthly declines for gold and the subsequent returns 3 months and 12 months later what we've experienced the last month doesn't even crack the top 20 worst months in gold's history but what you want to focus on is how does gold respond three months later and 12 months later back in June gold retreated 7.7 for the month when it fell from 1906 to 1770 per ounce it was the worst performing month since November 2016. given the current price action buying the dip in June likely will not prove to be a winning strategy over the short run according to our math model meanwhile if August continues its trajectory it's shaping up to be just as bad as the June or worse meaning be patient be an alligator that's definitely not a stat gold bugs will want to brag about but the scabs cuts and open wounds are starting to pour some blood into the streets by the dip in silver, silver prices have struggled as well negative 11 percent on the year and so far negative nine percent for the month again similar to gold silver's worst months trounced the current price action the table you're looking at right now is the worst 20 month declines and then the buy the dip model over the next three and 12 months as you can see the returns and you can see it wasn't that great of a strategy in the short run August and gold from Nixon closing the gold window on August 15 1971 to the fed injecting billions to plug the subprime crisis on August the 9 2007 decisions by the US fed in the month of August has had a profound effects on gold a town with a population of 10 500 holds the keys to gold's future success or failure in late August the annual Federal Reserve Jackson Hole Symposium will take place it is often the place of major policy discussions and unquestionably the hot topic will be how to keep the economy running without sending it into inflationary crisis with the coronavirus recession behind us hopefully it is hard to see nominal policy rates getting more accommodative rather than less or maybe more the same gold stocks a simple indicator using some simple math I like to use is to see how many precious metal stocks above 100 million market cap with over 5 million in cash are at 52 week lows versus how many are at 52 week highs and then the ones in neither category that's the chart we put together from last year basically when you look at this chart the black line is the ones that are in the middle of the range neither 52 week lows or 52 week highs the trend is your friend on that meaning more change is happening the green line is within 10 percent of its 52 week high only 2 of the precious metal companies are there and the red line shows all of the companies with over 100 million market cap with at least 5 million in cash that are within 10% of a 52 week low meaning 35 of all publicly listed companies with over a hundred million dollar market cap and five million cash or more are trading within 10 percent of their 52-week low I'm happy if gold goes down because it means I get to increase my positions and my favorite gold stocks at half NAV Net Asset Value simply that's smart investing to give yourself the most upside with least risk you have to be a contrarian sell when others are manic buying buy when others are manic selling I took a lot of cash off the table last summer and last fall I took a lot of flack for that because gold was going to the moon the hate doesn't bother me and neither does the confirmation bias cash is king and my subscribers and I are cashed up now and can buy when others who are over leveraged are forced to sell subscribers and I recently began nibbling alligator style on my favorite gold stocks game slowly we're building positions over weeks and months and that is the key in this marathon to building real wealth it's all detailed in my premium research service the KRO Katusa's resource opportunities in fact there are three gold positions at my target price right now how long they'll stay there at these prices is anyone's guess but I'm using my tranche strategy of buying and you can learn it too going all in and buying your entire position on the first dip is a recipe for disaster and financial rune it may not be as exciting as going all in but it sure helps you sleep a lot better at night the tranche strategy. Finally by popular demand the Katusa fellowship is back I'll be giving away at least two lucky YouTube viewers a one year subscription to my premium newsletter click the link in the description below to enter for free stay safe
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