THE VALUE VIEW GOLD REPORT

Transcription

1 THE VALUE VIEW GOLD REPORT Disciplined Analysis of GOLD Purchase Timing for Profits Volume 2019, No. 2 February 2019 PRECIOUS METALS SHINING Black line in top chart is value of an investment in what is called the S&P 500 Total Return Index. That index assumes that dividends on those 500 stocks are reinvested in the stocks. Due in part to U.S. Federal Reserve policy that index s peak to date was on 1 October Blue arrow highlights that peak. Above chart portrays returns on S&P 500 Total Return Index, $Gold, $Silver, GDX, and GDXJ since that 1 October 2018 high. Winners are readily apparent. Gold is really just an alternative currency to U.S. dollar. Bottom chart shows what dollar has done versus other currencies, 11 of them. Suggestion that Federal Reserve Ned W. Schmidt,CFA Publisher Schmidt Management Company 2018is our 31 st Year Beach Boulevard Unit 812 Jacksonville FL Phone: ned@valueviewgoldreport.com OUR WEB SITE FOR SUBSCRIBING IS This written effort is simply an attempt to report on global financial matters, and the foolishness of policymakers around the world. Wise people should not believe everything we write. Investing should only be done after research and study.

2 might moderate U.S. monetary policy by not raising interest rates as much as had been expected sent dollar down and Gold up. Some have even suggested U.S. interest rates might be lowered, which seems highly unlikely. Circle in that chart highlights deeply over sold condition that dollar developed. From that selling a rally emerged that is quickly correcting the over sold condition. During this rally Gold retreated from an intra day high of roughly $1,327. Thus far in the dollar s rally Gold has remained above $1,300, the prior resistance level. That likely means that $1,300 is now an important support level that can serve as a base for challenging the all watched $1,350. Would not worry much if $1,300 is broken. Comments by U.S. FOMC members gave stock market speculators hope that U.S. interest rate policy in 2019 might moderate. Included in those comments were some focused on liquidation of Federal Reserve bond portfolio. Those comments included a maybe on moderating that policy. Black line in top chart which replaced bars, using left axis, is dollar amount of that bond liquidation to date. Note that bond portfolio continues to be liquidated. No evidence as of yet of change in bond policy. In last 12 months, ~$374 billion of bonds have been allowed to mature without reinvestment I III Increasingly, the dominate thinking of speculators is that U.S. Federal Reserve is on the very verge of easing monetary policy, including II Page -2-

3 lowering interest rates in Generally this view is built on belief that U.S. economy is about to fall into a recession this year. This group also believes that Federal Reserve will support U.S. stock market as speculators must be rewarded with stock market profits, or U.S. economy will die. Does not matter whether or not any of the above is true. It is what speculators believe. Top chart is of ratio of $Gold price to S&P 500. If up from a previous value or rising, $Gold is performing better. As shown in chart, Gold has been performing better than U.S. stock market since end of May, almost nine months. Area highlighted by circle is recent experience. Strong spike upward occurred when Gold moved higher and U.S. stock market collapsed into year end. Then, normal January rally carried U.S. stock market higher, causing ratio to fall. Until the latest week when U.S. stock market became euphoric over dubious U.S. budget deal and possible delay of tariffs on Chinese goods, Gold had regained strength relative to U.S. stock market. Ratio had risen for three weeks. Global strength of Gold is reemerging. Gold had been developing a short term buy in middle chart for Tuesday. But, it hit week s low on Monday morning at $1,303, and then moved higher. Important to note that Gold is no longer afraid to trade both above 200-day moving average or above $1,300. That $1,350 level does not look far away now. Did the Federal Reserve blink? As of yet no indication that Federal Reserve is indeed on a path to easier monetary policy. As we observed earlier in chart on liquidation of bonds by Federal Reserve, it continues to liquidate those bonds. Earliest true indication Page -3-

4 of a change in U.S. monetary policy would be when it issues next policy statement. FOMC does not meet in February. Next FOMC policy statement is 20 March. In any event, markets think Federal Reserve might ease, and that helps Gold. Should FOMC actually ease, Gold should move higher. As charts below portray, globally investors are enjoying Gold. Only in U.S. do investors believe technofantasies are real investments. Relative Valuation: Gold is cheap. U.S. stocks are expensive. Analysis of $Gold / S&P 500 Ratio Data: Years Current Ratio 0.48 Probability Gold Higher = 77% Average Ratio 1.12 Standard Deviation 0.85 If S&P 500 = 2,752 Gold should be: $3, % If $Gold = $1,312 S&P 500 should be: 1,170-57% Extreme under valuation of Gold relative to S&P 500 continues at a level that screams for Gold. Page -4-

5 U.S. GOVERNMENT DEBT (US Debt to GDP: 105.2%) Actually heard recently several people mention size of U.S. government deficit. Only reason matter came up for discussion was that amount of U.S. government debt passed $22 trillion this past week. No one really cares, but some actually mentioned it. In chart to right red line is year-to-year percentage change in total U.S. debt, using left axis. Yellow line is price of $Gold, using right axis. Growth rate for total U.S. government debt did dip recently, but do not get excited. That dip is due to U.S. government partial shutdown. U.S. government is fully back in business, and spending like a drunken sailor. U.S. government debt is still growing faster, ~5% annual rate, than U.S. economy, ~3%. VALUATION US$ GOLD RENMINBI CNY/$ $/CNY US$ SILVER Target Price $2, % $ % $ % Fair Value $1,006-23% $ % Current Price $1, / $ $15.60 Short-Term Oscillator 52% 11% Signal Oscillator 52% 20% Probability of BULL trend 89% 68% 49% Bear Market Low $1, Dec 15 $ Nov 2018 $ Dec 15 % Change From Low + 25% + 3% +15% Days Since Low 1,157 1,160 Market Low Test $1, Dec 2016 $ Nov 2018 % Change Low Test 17% +12% 200 Day Moving Average Current - Value $1,269 +$43 $ $0.17 Page -5-

6 SILVER continues to trade above $14-15 trading range base that developed. However, it has given up the move above $16. That action might be considered a disappointment, but prices tend to move in pulses. Whatever direction prices are moving, they will move upward or downward, and then retrace part of that move. That pulsing type action is due to prices becoming over bought or over sold. In the case of Silver, move above $16 developed while Silver was trying to unwind an overbought condition. Note oscillator had hit a high, and then was trying to unwind. This week s selling of Silver has created a rare intermediate buy signal as we send this out. Last intermediate buy signal was way back at beginning of chart. Middle chart is ratio of $Silver to S&P 500. This week euphoria broke out in technology & internet fantasy stocks in celebration of agreement on U.S. budget and speculators declaring U.S./China trade war over. Ratio fell, but Silver had performed better than U.S. equities for three weeks before. GOLD STOCKS Gold stocks continue as the quiet market, with hardly anyone noticing they have tended Page -6-

7 to move up. Investors seem now to have multiple choices. Two ETFs do exist. GOLD, after the merger, does now offer a third alternative. NEM merger with GG will create a fourth choice. Latter two are free of fees. GOLD STOCKS ISSUES HI Denotes New 52 Week High in Month CURRENT US$ PRICE % CHANGE ESTIMATE of VALUE % TO VALUE % GROWTH NOW / LAST* Kinross Gold (KGC) $ $ % + 0% / - 3% Yamana Gold (AUY) $ $ % - 4% / + 0% Agnico Eagle (AEM) $ $40.0-4% - 3% / + 0% Barrick Gold(GOLD) $ $12.5-7% Gold Fields (GFI) $ $ % - 2% / + 0% Newmont (NEM) $ MEAN + 4% + 0% MEDIAN + 3% + 4% *Six month rate of change for trailing twelve month revenues. AGNICO EAGLE(AEM) is portrayed in bottom left chart. If one sits back and takes a look at that chart all the lines seem to have a downward trend to them. That is especially true for solid red line which is growth rate for revenues, using right axis. But note how stock climbed recently. Part of that move is due to price of Gold moving higher. Part is also due to chart on right from a recent company presentation. Plotted is AEM s Gold production per 1000 shares. Red line highlights important recent trend for AEM s Gold production. Peak production was in 2015, and it declined till Company is now forecasting production will rise for next two years to a new high. Stock has already responded some to this forecast of higher production. If company is right on its Gold production, stock should move higher. Web site is Page -7-

8 GOLD STOCK ETFs Top chart is for GDX, ETF for producing Gold miners, and second chart is for GDXJ, ETF for smaller mining companies. Both charts show a nice move upward since September low. Both are above 200-day moving average. Action in Gold stocks continues to confirm bullish position on Gold. Gold stocks have substantially outperformed U.S. equity markets. Year-to-Year % Change: GLD - 3% (- 4%) SLV - 8% (-10%) GDX - 5% (-13%) S&P % (- 7%) NASDAQ + 4% (- 5%) Number in paren is value last month. Page -8-

9 APPROPRIATE ACTIONS: Investors should be holding their Gold. Gold should be bought on price weakness. Investors should be establishing investments in Chinese Renminbi deposit accounts. Be selective, seek value, and take care of the dog, NED Follow Publication schedule: Next Trading Thoughts: 28 February Next monthly issue: 15 March VALUE VIEW GOLD REPORT MAJOR BUYS SIGNALS ON $GOLD Based on buy signals from Intermediate oscillator. Starting Date of This Record 8 July 2002 Ending Date for This Record $Gold = $1,312 on 14 Feb 2019 Number of Buy Signals 79 Correct Buy Signals 61 Percent Correct 77% Average Gain on Signals +51% Average Buy Price of Gold $1,080 Gain on Average Price +22% The signals are from the published record. They do not represent actual trades. This record is not a prediction of future performance. Wish it was! VALUE VIEW GOLD REPORT MAJOR BUYS SIGNALS ON GDX, GOLD STOCK ETF Using Intermediate Oscillator Starting Date of This Record 21 February 2006 Ending Date for This Record GDX = $22.14 on 14 Feb 2019 Number of Buy Signals 64 Correct Buy Signals 12 Percent Correct 19% Average Gain on Signals -27% Average Buy Price of GDX $34.33 Gain on Average Price -36% The signals are from the published record. They do not represent actual trades. This record is not a prediction of future performance. Wish it was! Page -9-

10 Subscribe to THE VALUE VIEW GOLD REPORT. One(1) Year =US$199 Two(2) Years = US$348, SAVE $50 VALUE VIEW GOLD REPORT can be delivered each month by to you. Use our web site to subscribe: Or, use form below to order by credit card. To pay by check: Checks must be made out to Ned W. Schmidt, and sent to Beach Blvd., Unit 812, Jacksonville FL, 3222 Credit Card Billing Information. (All sales final, and no refunds.) Name Address 1 Address 2 City/state or Province / Country/ Mail Code / Card Type & Number MC / VISA / AMEX Security Number Back of card. Front on AMEX. Expire Date Phone Number Address Signature Per one of U.S. founding fathers: A useless man is a disgrace. Two useless men is a law firm. Three or more is the U.S. Congress. Page -10-