“A joyous bull era is poised to begin, with good times for all gold investors!”

There will be little that is joyous about the next gold bull era.

Let me write that again; there will be little that is joyous about the next gold bull era… because there will be no gold bull era until the stock bull era – which has seen paper assets of all kinds appreciate in a sea of Central Bank engineered liquidity – is over.

See US Stock Market Danger and Golden Goodies for some weekly analysis (and the title quote) that the gold “community” is regularly treated to (it’s golden goodies, after all). This is no comment on GoldSeek, which is a gold site that also publishes my broad market and gold-related stuff as well and also the work of others regardless of whether their orientation on gold is positive or negative.

But it is a comment on the premises in the article linked. First of all, the author has it right in predicting stock market danger and golden goodies, at least insofar as the two will likely be opposing conditions.

But among the unsubstantiated and/or false statements:

  • “Crash season” begins today for the US stock market as “stock market heavyweight” Mike Wilson of Morgan Stanley predicts a crash worse than February. All kinds of smart people are predicting a market crash – and indeed I favor a correction – but so too are all kinds of smart people fading bearish experts in the media.
  • “While US stock markets are set to swoon and perhaps crash, the rise of China/India and the normalization of America is producing a new era for gold. The wild fear trade of the past is being superseded by a theme of general respect for the asset.” Err, no it’s not. Gold has been completely kicked to the curb as the dumbest money may be sucking on a sucker’s rally in stocks to test the January highs. But the author is almost always bullish on gold, so squirrel meet nut.
  • “The growing dominance of Chindians in the market is producing a much calmer investing experience for Western investors who are feeling this wonderful golden vibe!” First of all, that is a really goofy nickname given to two distinctly different cultures. Chindians? WTF? Second of all, Western investors are not feeling a golden vibe; they are either puking in their mouths or feeling a paper (and digital) vibe. This is by definition a better risk vs. reward environment for gold than it was last spring, but nobody’s feeling good about it and that is exactly why the RvR is good.
  • There is the usual Indian/China demand stuff in there, which has nothing to do with anything because for every bid there is an offer.

Finally, and most importantly, he notes that gold stocks have out performed vs. gold, which is correct (although that leadership is getting tamped down at the moment as gold mining companies generally spit up all over themselves this earnings season. But the article goes on to reassure gold stock investors thusly…

“Well, the most reasonable explanation is that savvy institutional power players are looking beyond the short term earning hits.  They are focusing on the rise in inflation in the West.”

Dude, why on earth do you think that mining companies are shitting the bed compared to expectations this earnings season? It’s because whatever inflation there is sloshing around in the system has driven Energy and Materials commodities higher in relation to gold. In other words, it has driven gold mining cost inputs relative to gold mining product.

The above statement, along with all the stuff about Chindia demand implies a macro backdrop that is suppressive of gold and flat out antithetical to gold mining operations. Global growth has continued apace and while the US may shift from out to under performance mode, a global inflationary backdrop is not the best time to buy gold stocks.

As proven in Q4 2008 and to a much less intense degree in Q1 2016, the time to buy the sector is when risk is going ‘off’, liquidity is constrained and gold is rising vs. inflation markets. Gold has been declining vs. the CRB index since 2016 and therefore the weakness in gold stocks has been 100% fundamentally logical. Gold has been declining most recently vs. the S&P 500 since 2016 as well. The weakness vs. commodities is more a functional sector fundamental (as mining product vs. cost fundamentals weaken) and the weakness vs. the stock market is a macro fundamental (as massive herds of investors go full risk ‘on’).

You can’t have your cake and eat it too, but that is the way some gold analysts operate and in my opinion that keeps some of the die hard bugs in the game. The reason I ever took note of the author of this article is because early in the bear market I was not able to write positive things about gold or especially, gold stocks. A subscriber informed me he was leaving in favor of the more “joyous” work above.

On rare occasion do I criticize smaller players out there (as opposed to the mainstream financial media) because I am a small player and I am wrong my own share of the time (and have been called out as such). But the stuff above is and has been incorrect for years now, yet the message – with a few subtle revisions along the way – is unchanged. Despite the balls out post-2008 US and global inflation, gold has been in a bear market since 2011. You can’t have your cake and eat it too, as we noted in rebuttal to another article that came out as gold was making its top in April.

The article was called SPX and Gold Combo Chart: The Best of Both Worlds with a chart showing that both SPX and gold were bullish. We answered it thusly… Gold and the Stock Market; It’s Not the Best of Both Worlds. Case closed. With gold especially, you cannot manage simply with charts and think you’re going to get it right a majority of the time. And I am a chart guy!

Subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.