Investors Need To Be In Precious Metals As S&P Marks Historic Bull Run
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| Image by:Pavel Ignatov / Shutterstock.com |
(Kitco News)- The S&P 500 Index has reached a historicalmilestone: Wednesday marked the longest bull market run in history and onemarket analyst said that this is the time that investors need to move intoprecious metals and mining stocks.
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| Fred Hickey, creator of the investment newsletter The High-Tech Strategist |
In an exclusive interview with Kitco News,Fred Hickey, creator of the investment newsletter The High-Tech Strategist,said that the precious metal sector is on the cusp of a new paradigm shift assentiment in the marketplace is extremely negative.
On the flipside, the tech-sector marketspecialist explained that valuations in equity markets are overvalued and areunstainable at current levels.
“As of today we have the longest bull marketin history and on some levels we have the most expensive markets in history,”he said. “I need to be in precious metals because this market is overbought andcoming down.”
Hickey added that the impending correctioncould be a lot worse than some are expecting as the U.S. economy is not asstrong as it appears. He noted that growing debt is going to be a significantweight on economic growth going forward.
“We have been growing the deficit during aneconomic recovery, what is going to happen when a recession hits? This is goingto be the best environment for gold,” he said. “I think the bottom hit at$1,050 in 2015 and I think we are going to see a 20-year bull market for gold.”
GoldIs Holding Up Well Despite The Selling Pressure
While gold has struggled to find momentum asprices have dropped more than 10% in the last four months, Hickey said that hesees relative strength in the marketplace, and the impact of short-selling isweakening.
He noted that speculative bearish positionsare at historic levels. The latest trade data from the Commodity FuturesTrading Commission shows that money managers are net-short gold by 83,324contracts. He compared current trading data to the 2015 lows when moneymanagers were net short by 20,566 contracts.
“We are four times higher than when we were atthe lows three years ago. We see off-the-chart short positions and yet theshort-sellers have only been able to get the price down to $1,200,” he said.“We are just waiting for the match to light the fuse that will propel goldprices higher."
U.S.Political Turmoil Could Be The Flame
Hickey said that recent court drama could bethe key that pushes equity markets down and gold prices higher. Tuesday theTrump administration was dealt two significant blows as President DonaldTrump’s personal lawyer plead guilty to a variety of charges including campaignfinance violations, which he said in court were “in coordination and at thedirection of a candidate for federal office.”
At almost the same time a jury found formerTrump campaign manager Paul Manafort was found guilty on tax and bank fraudcharges.
Hickey said that he doesn’t think the legaldevelopments will bring Trump’s presidency down, but they are problematic forthe Republican Party that is trying to hold control of the House and Senate inNovember’s mid-term elections.
“I don’t think the market will like all thispolitical uncertainty and that will be good for gold,” he said.
He also noted that the S&P’s historic runcould also be its biggest weakness and could lead to a more significant correctionthan some analysts are expecting. He said that half of the money managers inthe marketplace have never experienced bear market conditions.
Hickey’sTop Three Mining Picks
As to what mining stocks investors should belooking at, Hickey said that he invests in companies that have projects inwell-developed jurisdictions, with established rules of law.
He added that his three top picks are AgnicoEagle, Kirkland Lake Gold and Prentium Resources.
While Agnico released disappointingsecond-quarter earnings last month as its net income fell, Hickey said that thecompany is in a transition period as it looks to open new mines in Canada.
“Agnico’s new mines are going to be low costand higher grades,” he said. “I think the company is going to see a significantincrease in its cash flow next year. This is the time to buy before peopleunderstand what is going to happen.”
Hickey added that he likes Kirkland Lake Goldand Pretium Resources because both companies have been able to increase theircash flows significantly. Kirkland Lake reported record cash in the secondquarter.
Meanwhile,Pretium saw its balance sheet increase by more than $72 million in the secondquarter to $142.5 million.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.