Young Bull or Long in the Tooth?
Occasionally, not so easily found public research is sent to us. We pass it on hopefully your benefit. For our first OpportunisticTrader “share” here is the latest gold research from CANACCORD | Genuity presented with only one comment:
Based on their assessment bull markets average an ROR of 106%. Using Dec 2015 as their reference point, that puts us near $2180.00. When you look at it from a long term trajectory, its not nuts. But how long would we have to wait?
We are well over their average duration for bull markets. So by ROR this is a young market. But by Time, it is long in the tooth… you decide
Here are some highlights (emphasis ours)
Gold early into a bull market phase: In Figure 15 (see 3rd pic), we have looked at historical gold bull and bear markets (i.e., at least +/- 20%) and the performance of the US dollar going back to 1971. During gold bull markets, gold has gained 106% on average while the USD has declined 13%. During gold bear markets, gold has dropped 34% on average against the USD rising 16%.
We believe we are in a new bull market for gold that started in December 2015. Since then gold has increased 16%, suggesting plenty of upside potential based on historical cycles. Over the same time horizon, the USD has declined 5% and gold equities have gained 45%. On average, gold equities have had a beta of 1.5x to gold.
Full Report Here
The Fundamentals are Bullish
Trump Tariff Effect on Gold
Bear Market and Bull Market Durations
The firm’s general outlook
From Page 1:
Recommendation: Add exposure to gold equities as the technical and macro outlooks for gold improve and suggest an intermediate-term low is near. Technicals, Macro, and Fundamentals are all supportive of further upside in gold. This publication draws together our technical research as well as fundamental research from our Metals & Mining team and macro research from our Quantitative Strategist, Martin Roberge.
From the fundamental perspective:
- Gold fundamentals are discussed in Carey MacRury’s assumptions of coverage, Mining for better returns published 22 April, and in Precious metals – Q2/18 Scorecard: Trump tariff turbulence published 24 July by Carey MacRury and Rahul Paul.
- We consider gold to be a monetary asset rather than a commodity and thus driven by real interest rates and global economic growth.
- Since mid-April, gold (and most other commodities) have sold off on the back of escalating US trade tariffs and a stronger US dollar.
- We are, however, bullish on gold, with a forward curve derived price deck featuring US$1,456/oz gold. This fits with an economic outlook for slow global growth and low real yields.
- We believe that the current bull market for gold commenced in December 2015, appreciating 16% while the USD has declined 5% and gold equities have gained 45%. For context, gold bull markets since 1971 feature gold appreciation averaging 106% coupled with an average USD decline of 13%.
- The market currently focuses on the “large and liquid” names with small cap exploration and development names still under pressure.
- Small caps have been in a cyclical uptick since January 2016. If, however, this cycle ended in January 2018, it will have been the shortest and weakest in decades with a 76% return over 25 months. For context, the average uptick return is 202% over 47 months. We consequently await the “next leg up.”
- Seasonally, the best returns are found in Q4 while Q2 and Q3 are generally weak, making this an excellent entry or re-entry point.