Gold Rally Confirmed: Trump Honeymoon Over
When President Trump was elected in November, the markets began staging a massive rally in hopes of deregulations and tax reforms, but since the 20th of January, Inauguration Day, the markets have been witnessing how the slow wheels of Washington D.C. will not make these changes without fighting back.
These Indicators Are Super Bullish – we’ll have a Big Year Ahead of us.
The CAPE ratio takes 10 years’ worth of earnings instead of the usual P/E ratio. This is one of my core charts because it gives a longer perspective on markets.
Right now, the CAPE is at 28.4, which is 70% higher than average, and that’s mostly due to low interest rates. This tightening period could bring prices down by 30% without early warnings.
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Gold is now trending higher, and not only is it a strong move higher, but it is truly a sustainable one as well.
Over the past 87 years, the best times to own gold investments have been when it outperforms the U.S. dollar and the 4 major currencies – at the same time.
What has frustrated many investors in 2016 is that the rally was short-lived, and the reason for that is delusion.
When companies finance new projects by issuing shares or taking on debt, the prices go down, but this is changing, and that’s important – after close to 7 years, mining companies are starting to see free cash flow rising.
This type of change occurred earlier this century, and the moves were spectacular.
Trump now faces opposition with regards to his plans, and this friction is what the market sees as uncertainty.
Meanwhile, inflation is creeping up, which will continue to make commodities rise in price, and after years of cyclical downtrend, Wealth Research Group sees the commodities sector, as a whole, in bullish territory.
Not only is the Global Mining Stock Index back up to January 2015 levels, but the overall banking community, which influences most brokerage clients globally, are bullish themselves.
Big banks believe that this is time for their clients to be positioned in commodities, and that will fuel the resource sector with cash.
Notice that inflation levels have now been rising for 18 months, but more importantly, they are above 2012 levels.
The January rally is not a short-lived one – the U.S. dollar is weak, there’s friction in Washington, inflation expectations are going higher, and commodities are on a massive upswing – this is a longer-term move.
Speaking with CEOs in the past 40 days, I have witnessed how they are cautiously optimistic for the 1st time in a while, and this is exactly what we want. Cautious optimism has been the right state of mind of all great CEOs in the free enterprise system – it means they are not afraid of making calculated moves that they have been forced to hold back on, and at the same time, this is far from a reckless financial environment.
We are in for a firm cyclical move higher, and if gold and silver prices stay strong, you will have access to the brightest management teams in the business.