Gold finished 2017 up 13.5% - the largest annual gain since 2010 - and despite that, the junior equities did not keep up.
The World Gold Council (WGC) recently released its annual outlook on gold and the key market trends that should support the gold price in 2018.
The four are:
synchronized global economic growthshrinking central bank balance sheets and rising ratesfrothy asset pricesmarket transparency, efficiency, and access.The synchronized global growth underway is important because it will leave the largest gold markets in the world - China and India - with more disposable income.
Disposable income that, historically, has found some of its way into the gold market.
The WGC's report showed that between Q1 and Q3 2017, China's consumer demand increased 12%, U.S. jewelry demand hit a seven-year high, and technology demand was on course to record its first year of growth since 2010.
The four-decade bull market in bonds means there are many portfolio managers who have no idea what a bond blowup looks like.
I believe the next few years will make wiser men and women out of these managers and advisers much like 2008 and 2010 did for me when I was trading leveraged options on margin.
I'm a broken record when it comes to bond money being the single major catalyst that launches gold into the bull market we're all waiting for, so I won't get into that again, but rising rates are the precursor and that's happening as we speak.
Frothy asset prices and access are the last two supportive trends that the WGC identifies and, again, I agree.
Many, especially in the speculative world of junior resource stocks, have been very vocal about crypto and cannabis diverting speculative dollars away from juniors and into those respective sectors.
Let's say I agree. By that same rationale, junior speculators should be delighted at how kind those sectors have been to the capital parked there.
In most instances, every dollar into the crypto and cannabis spaces has multiplied, sometimes many, many times over.
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The reason junior speculators should be delighted is because even the bravest of speculators understands that you have to take profits sooner or later and I believe that some of the speculative dollars that rushed into cryptos and cannabis stocks will slowly find their way into the better juniors.
Why hasn't it happened yet?
Because it's so much more fun to invest in a stock market that goes higher every day and cryptos and cannabis and art and cars and every other asset class (everything is awesome!) that doesn't have the permit risk of an Abacus, mining risk of a Pretium, or exploration risk of a Novo.
Let me be clear: we need a sustained breakout over the $1,377 high of 2016 and then a final breakout over $1,449 before we can start wearing Gold $1500, Gold $1600, Gold $1,700 hats.
We're getting close. Until then, it's a ping-pong game. Range bound.
Let me also be clear that by then you will be paying two, three, and four times more for the same shares you could buy today and the easy money would have been made.
2018 will go down as a contrarian's dream when it comes to establishing positions in quality juniors at incredible entry points.
To your wealth,
Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.