The markets are still waiting for a clear winner to break out before the Nov. 8 presidential election. It’s hard to hedge our positions with this much uncertainty overhanging this election. In the meantime, the markets are in the early stages of Q3 earnings, which are turning out to be a pleasant surprise.
It’s still early, but with over 80 S&P companies reporting, their total earnings are up 3.9% from the same period last year; 79% are beating EPS estimates, and 62% reporting better-that-expected revenue estimates. It’s still early, but not a bad start.
It’s time to take another hard look at gold
So with all this uncertainty, what should an investor focus on? There is one investment vehicle up 16% for the year, while the Dow Industrials, S&P 500, and Nasdaq are each up about 4.5% for the year. Gold has been quietly building a base around $1,250.
There are many ways to invest in Gold. Harris Shapiro, CEO and founder of Focusedstocktrader.com, has realized huge gains this year in the gold mining sector. In February, he recommended the Gold Miners 3X ETF (NUGT) at $10.00 (split adjusted) and traded it several times on the way to $35.80. Harris took profits in early August and believes it is time to re-enter the sector.
Like Harris, I also believe it is time to take a good hard look at investing in gold. But I prefer the physical. Gold closed yesterday at $1,271. After falling to pre-Brexit levels in early October, gold seems to have built significant support at the $1,250 level.
The yellow metal remains up 16% for the year, and the 8% pullback from the high of $1,363 is very common in a long-term bull market. During the 10-year bull run from 2001 to 2011, gold rose 645%, and yet there were 19 corrections of 6% or more during that time.
Dave Williams of www.strategicgold.com says gold will remain relatively stable in this price range until after the election and the December Fed meeting. Williams says, “Looking past the short-term considerations, gold remains in a bull market bolstered by sound fundamentals.”
Some of these sound fundamentals include global central banks that remain solidly entrenched in negative real rate policy. Perhaps the biggest concern is global debt, which the IMF says has hit an all time high of $152 trillion. This debt, placed against a background of tepid economic growth and a failed Fed policy that is only inflating dollars and US equities, will eventually cause a bubble that is bound to burst. Investors may wish to take advantage of this price level.
If history has taught us anything about inflating currencies, it can only last so long and always has a bad ending.
Whether it’s through ETFs or physical gold bullion, it can’t hurt to start adding gold to one’s portfolio. Central banks have been adding to their gold reserves. At the same time they’re repatriating their gold holdings from central banks, such as the New York Fed vault, to vaults back home. Do they know something we don’t?