Gold – Time to Shine… Again (Finally)?

by FI Fighter on December 5, 2018

in Precious Metals Updates

Gold is one of those quirky conundrum type of “investments”… I use the term “investment” quite lightly because even though the shiny yellow metal has been around for centuries, it’s still something that is totally misunderstood and umm hated by most of society… For gold bulls, “investing” in pet rocks has been more or less a lost cause (losing proposition) since 2011/2012, especially if we are taking about the total returns put forth by the mining stocks associated with Atomic Number 79.

We are talking about some pathetically atrocious value creation for shareholders…

Anyway, one main reason investing/speculating in gold and gold mining stocks might appeal to you is for the simple fact that it’s very much a contrarian play at this time… Whereas other assets such as general equities and real estate have experienced a rip-roaring bull market for the ages since 2009, gold and gold mining stocks are arguably as beat up as they’ve ever been…

Well, perhaps things aren’t as bad as they were in late 2015/early 2016, you know, around the time I was “backing up the truck” and loading up aggressively… but things are nevertheless still pretty damn bad right now…

Now, there’s no way anyone can predict/know if/when this stupid yellow pet rock will ever become en vogue again, but the market is quite a mercurial beast, and it typically turns when nobody expects it…

Here’s where things check in, at the time of writing…

For gold bulls, there really ain’t much to get excited about these days, but if history is to be used as any guide/indicator, seasonally speaking, gold tends to rally quite nicely from around December until say into January/February of the new year.

I mean, I’ve only been following the gold space since 2015, but check out the following chart…

Of course, everyone wants to get in right before the moment “life changing gains” occurs, but c’mon, even though I was lucky beyond belief to have been able to sneak onboard the gravy gold train right before departure in early 2016, I’d be lying my ass off if I told you that I knew definitively that the turn was just about to occur…

In all honestly, I had no earthly idea what was gonna happen next… back in late 2015/early 2016…

I simply decided to go “all in” like a moron because I have this strange affinity for buying up assets that are hated by the masses and trading at/near record lows in terms of valuation… and outright being decimated (facing an extinction-level event).

Where do we stand today?

Well, once we finish up with “tax-loss selling”, there’s the following hurdle that needs to be cleared…

From Federal Reserve.

The last rate hike of the year…

Will it be smooth-sailing for gold after what should already be a “priced in” event by the market?

Who knows…

But let’s just say it’s been a rough and tumble year for gold and gold miners…

After breaking through $1,300/oz around spring of this year, I was bracing myself for impact… to the downside…

Not surprisingly, many “leading” gold miners are following gold and indeed leading underperforming… to the downside…

Most “leading” gold miners are down say -20% this year…

Both physical gold and the mining stocks are down this year…

But here’s the deal…

The thing about PHYSICAL GOLD is this — It’s a long-term “store of value”.

Real_Wealth - 1

Physical gold coins/bars are definitely NOT sexy (well, I think they are, but I’m a total weirdo), but over the long run, physical gold should keep pace with inflation… and that’s why they say gold is more or less an inflation hedge… It’s supposed to preserve purchasing power…

 

Further…

 

Gold is a diverisifer in one’s portfolio (insurance in case bad shit happens elsewhere…), but not really meant to be a “wild speculation” that’s gonna make you a crazy boatload of $$$ in terms of overall gains…

 

Mining stocks, on the other hand, are this — A perpetual disappointment and destroyer of capital.

 

Here’s a 10 year chart… Prepare for shockingly AWFUL!

The mining business is just total shit… especially as it pertains to precious metals, like gold.

I don’t care what anyone else says, my beliefs will never change that these “assets” are only meant for flipping (i.e. Buy and Hold Rentals)…

In other words, to be perfectly clear:

Buy low and sell high.

By low, I mean like really, really low

For example, negative enterprise value low

If you want to attempt Buy and Hold Forever with mining stocks, be my guest, but it’s certainly a high-risk proposition, in my own humble opinion, unless you are going with a very well diversified royalty and streaming business (e.g. Franco-Nevada; FNV) who has a proven management team in place that actually knows how to… you know… create value for shareholders (trust me, this is a concept that isn’t very well understood in the gold space and most companies never got the memo)… If you wanna attempt Buy and Hold Forever with individual miners, do so at your own peril…

For all intents and purposes, the goal with mining stocks is to get in early when nobody gives a flying fudge (e.g. late 2015/early 2016), and get out of dodge when everyone feels smug and all your retail friends are interested in participating (e.g. summer 2016)…

 

I’m not saying it’s easy, but that’s what you’ve got to do to survive and not lose your ass in this space…

 

But enough ramble…

 

Gold is pretty seasonal… But please keep in mind, past performance/trends aren’t a good indicator of future performance/direction, but hey, it’s worth pointing out, anyway…

 

What will 2019 bring for gold and gold mining stocks?

In addition, is the following an aberration or will it be an ongoing trend moving forward?

 

If it’s the former that we’re talking about, how many more rate hikes can the market handle before it starts to show more serious signs of wobble wobble!?!

 

If it’s the latter that we’re talking about, will a tanking equities market be good or bad for gold?

 

Nobody knows, but it’s been pretty rough sledding since around August/September 2016 for goldbugs…

No doubt, I would love to see a gold rally resume course, but in the Game of Speculation, you gotta be prepared to accept whatever happens…

 

As always, never gamble with more $$$ than you can afford to lose all of!

 

Right now, nobody gives a hoot about gold and gold miners… Will they in 2019?

 

We’ll see…

 

I feel it in my fingers
I feel it in my toes
The GOLD that’s all around me
And so the feeling grows

 

Bring on the gold rally (thanks Kev for the following pic)!!!

 

Fight On!

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{ 1 comment… read it below or add one }

1 DennisNo Gravatar December 6, 2018 at 9:43 am

Hi FI fighter,

I miss your net worth posts. Personally I’m flat for the year but not as savvy of an investor as you. If you can share, great.

-Dennis

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