Did Mark Cuban and the Dow just prove gold bugs right?

February 16, 2016 03:10 PM

Eric Coffin, editor of the HRA (Hard Rock Analyst) family of publications, said in an interview with The Gold Report in December that the U.S. Dollar Index had topped, and that could mean gold equities had bottomed. Reached Feb. 12, he said, "It is shaping up just the way I thought it would." He pointed to negative bond rates as making even a zero yield on gold look attractive.

Coffin also didn't see the change in sentiment as a temporary blip. "I don't see a reversal in the near term because there are no easy answers. New York is going to enter a bear market and that is good for gold and it will be even better for gold equities, which tend to give you more leverage to gold price changes." He ventured that generalists coming back to the market would start with the quality producers, and work their way down the food chain.

Shadowstats editor John Williams also pointed to currency concerns for the change in investor sentiment toward the shiny metals. "A weakening dollar, perceptions of dwindling prospects for aggressive rate hikes by the Federal Reserve and mounting global market concerns as to financial system stability all have combined to boost gold and silver prices," he said.

Williams also did not see much light for the larger economy on the statistical horizon. "Exacerbating market difficulties, U.S. economic reporting in the near term should continue to deteriorate markedly, not only with generally downside surprises and continuing weakness ahead for monthly data, such as industrial production, but also with downside revisions to, and outright contractions in, near-term GDP reporting.

These circumstances should help to keep further Fed tightening in check until after the November presidential election, and generally should keep downside pressure on the exchange-rate value of the U.S. dollar, with upside pressure on prices for precious metals."

Doug Casey has long preached that gold is a commodity like coffee, copper or aluminum. "But unlike other commodities, gold is money," he reminded his readers in an email on Feb. 11. "It's held its value for thousands of years. Gold is a safe-haven asset, which is why investors often buy gold when the stock market is struggling."

In that note, he reiterated that "with the FANG-Facebook, Amazon, Netflix, and Google stocks dropping, Vectors Gold Miners ETF is carving out a bottom from one of the worst busts ever, a 74% drop from its 2011 high." His prediction? During gold's last bull market, gold stocks soared 273%. During the gold bull market before that, gold stocks soared 206%. And gold stocks soared 602% during the gold bull market from 2000 to 2003. "We think gold stocks could surge as much or more during the next rally. . ."

Swiss fund manager for AgaNola Ltd., Florian Siegfried, added a global perspective to the volatility. "As precious metals markets were bo, added a global perspective to the volatility. "As precious metals markets were bottoming out over the last few quarters, I remained cautious on the sector. However, the pace of distress in global credit and equity markets over the last few weeks points to a profound change in world markets, and this is why I believe we are now in the early stages where a new bull market in gold and silver is being developed," he said.

He continued, “Since the beginning of the year, gold has soared against every fiat currency, including the U.S. dollar. Gold stocks have outperformed bullion, and both the miners as well as the metal have been generating higher highs and higher lows. Technically, this is an encouraging picture, as typically seen at the beginning of a bull market in precious metals. Many brokers are skeptical that this rally in gold will hold, and virtually no research house has lifted its gold forecast—yet. This is positive for bullion's future price appreciation potential.

"Fundamentally, I think we are at a key reflection point for precious metals. After 637 rate cuts and $12.3 trillion in global quantitative easing, I think the world is finding out that governments and world central banks have created a colossal Keynesian failure, which is now starting to unravel.

Gold is a hedge against government, and the 16% rise in the bullion price this year is telling a story. Central banks have no more dry powder to reinflate the markets. I think the free market is now in an early stage of a lengthy process where all asset prices will revert to their mean and where fair market value will ultimately be restored."

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