The ongoing Stealth Rally that no one is talking about

VaselineSeptember 5, 2024

0 4 minutes read

The ongoing Stealth Rally that no one is talking about

It’s one of the hottest deals of the year… and hardly anyone is talking about it.

I’m not talking about AI stocks. I’m not talking about cryptocurrencies. And I don’t mean some penny stock you’ve never heard of either.

I’m talking about gold.

The truth is, gold has been pretty messed up lately. Gold prices hit a high of over $2,550 an ounce this week, and gold is up nearly 22% year-to-date. That beats the S&P 500, Dow and NASDAQ gains of 15%, 7.7% and 13.8%, respectively.

So, in today’s 360 SquareI’ll share three reasons behind gold’s rally – and why I expect this rally to continue. Next, I will explain a great way to invest the profit from the gold rally that is much easier than running to the nearest Costco and buying gold bars.

Reason no. 1: Central bank purchases hit a record in Q1

It’s not just gold bugs and doomsday-mongers who are into the yellow metal. As it turns out, so are central banks.

In fact, gold purchases by central banks recently reached a record high. According to the World Gold Council, 290 tonnes of gold were purchased in the first quarter, just beating the record of 286 tonnes purchased in the same quarter a year ago.

Actually, Bank of America Corporation (ferry) analysts estimate that gold has overtaken the euro to become the world’s largest reserve asset, second only to the US dollar.

Gold appeals to central banks because it diversifies their reserves from domestic currencies (which can be volatile) as well as the dollar. They also see it as a safe haven during times of economic, financial and geopolitical instability (I’ll have more to say about this in a moment).

Reason no. 2: Physical gold ETFs see more inflows

It’s not just central banks that love gold right now. Individual and institutional investors are also buying.

Physical gold exchange-traded funds (ETFs) saw inflows for three straight months, according to the World Gold Council. In July alone, about $3.7 billion accumulated in physical gold ETFs.

As more investors buy these physical gold ETFs, these funds must buy more gold and store it. That persistent institutional buying pressure has created a lot of momentum.

Reason no. 3: Geopolitical uncertainty

Geopolitical tensions are another factor that has driven gold prices higher. Currently, there are flashpoints around the world that could set off a powder keg and affect the global economy.

The Israel-Hamas war and the Russia-Ukraine conflict are two that come to mind.

But there is also uncertainty around central banks. The US Federal Reserve signals it will cut key interest rates in September. But the problem is, we’re already seeing signs of a slowdown in the U.S. labor market, and we’re wondering if it will be too little, too late.

An example: the unemployment rate was 3.4% as recently as April 2023, but has since risen to 4.3%. The US Department of Labor announced that 818,000 jobs “disappeared” in the past year (through the end of the first quarter) due to revisions related to people who have multiple jobs and/or do not pay income taxes. So instead of creating 2.9 million jobs over the last 12 months, the US economy only added about 2 million jobs. Therefore, the unemployment rate is likely to be even higher.

In other words, if the Fed fails to achieve a “soft landing” and avoid a recession, then gold will look even better.

Can this rally continue?

As long as there is uncertainty in the world, the answer is yes. In fact, if we get a market shock, gold will probably do quite well. So investing a portion of your wealth in gold could help shore up your portfolio against turbulent markets.

Gold has long been a viable hedge against rising inflation and financial markets, primarily because its value rises in a chaotic economy. Consequently, regardless of the state of the financial markets or the economy, it makes sense to have insurance in case a financial disaster strikes.

How to play Gold Boom

Now, buying physical gold can be a hassle. You need to find a reputable seller and you need a safe place to store it. So a much easier way to profit from the gold boom is to buy gold stocks that are influenced by the price of gold itself.

Because gold companies are leveraged, they can see even bigger gains from a small change in the price of gold. In other words, a 10% move in gold could cause a 30% gain in a gold stock.

This is why I recently recommended a new gold mining stock Growing Investor subscribe to the September monthly issue. Not only is it well-positioned to take advantage of the gold boom, it also boasts higher fundamentals.

In the company’s most recent quarter, it delivered a sales surprise of 20.8% and an earnings surprise of 15.1%. For the next quarter, the analyst community now estimates sales growth of 26.1% and earnings growth of 111.4%. Additionally, this gold miner has a history of rewarding shareholders, having paid a dividend every year since 1983 and currently has a dividend yield of 2%. So, it offers a one-two punch of income and growth.

For more details, click here and become a member of Growing Investor today.

(Already a Growth Investor subscriber? Go here to connect to the members-only website.)

Sincerely,