Sunday, February 7, 2016

Is the bear market in gold over?

After four and half years of relentless bear market pain in the commodity and gold market the question of whether the bear is over has to be asked after the action in the markets over the last couple of weeks. First a couple of charts.

The weekly charts show the definite inverse correlation of the US Dollar and Gold. The dollar has had a big reversal and conversely gold has a big jump. The dollar has weakened as it has become clear that the US economy is slowing and that the Federal reserve may have been wrong in beginning a rate raising cycle. The plan for four rate increases in 2016 looks to be in jeopardy. The prospect of interest rate increases that the Fed had been advertising for months were the fuel for a higher dollar. Now that plan is suspect traders are dumping the dollar and buying gold.

The chart above is of the GDX which is the large gold miners index. Notice how much it jumped over the last couple of weeks. Most of the time the senior golds will move in advance of the gold price and of the gold juniors. This appears to happening.

It is difficult to call the end of the gold bear market just on this data alone. Nevertheless the action in the markets and the gold stocks and gold price coupled with the fact that that interest rate increases by the Fed are no in jeopardy indicate that we may be at the end of this long bear market.

I already own Sandstorm Gold which is a gold royalty company. On Monday I will be adding Banro Corp which is low cost African miner currently ramping production. Charts of these two are below.

If this is in fact the end of the long bear market we can look forward to some big returns over the next year of two. We will have to let the market tell us for sure but things are looking encouraging.

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