Every 10-20 years we experience a precious metals bull market. There are many reasons which cause these explosive moves but they all boil down to one main theme: people lose confidence in government. It may be from war, hyper inflation, or political unrest, but it always come back to the people of the world losing faith in their leaders. The amount of money which can be made as a trader during such periods would normally take years to harvest investing in the stock indexes. We entered one of these periods last June and it should not stop until 2024. Our think tank thought this would be a good time to educate investors in the simple patterns of precious metals and to get you comfortable investing in this asset class.
Gold is the ultimate driver of any precious metals bull market and it always moves first. Gold miners then normally follow gold. Last but not least is silver, which rallies at the end of most cycle moves in metals but normally produces some of the largest moves in all of the sector.
We have a major cycle top in May of 2021. This will not mark the end of the precious metals bull market but will usher in a 6 month peak that will hold and allow the sector to consolidate before the bubble blow off phase begins. At Hedge Fund Z, we have traded our own capital in the gold markets since the inception of the break-out in gold last June. We followed up with the winter rally into early March and then again the break-out in May. We attempt to time 1-2 month peaks during these runs to harvest huge profits. This past week's rally has surprised us as we had strength into July 17th before an upward explosion in August, but that is what happens during these bull periods - the surprises are to the upside, not downside. On a weekly closing basis, last week's closing high should hold before a brief pullback occurs into early August which will present a buying opportunity. If you are a longer term investor in our opinion you can buy any of the asset classes we cover in this article and hold with comfort until May of 2021. Silver offers the greatest upside potential followed by Junior miners . We favor the following ETF’s for exposure in the metals markets, GLD, SLV, GDX, and GDXJ. Avoid triple levered ETF’s as they are for day-trading in our opinion. Not an asset class to hold.
GDX, the senior gold miners, were next in rotation and broke out of their May 2016 high in May of 2020 through the $32 level. These miners typically produce a nice profit and are comprised of popular mining companies with strong balance sheets.
The junior miners, GDXJ were third to break out of of their 2016 baby bull high in June of 2021 through $53. These miners are more speculative and typically don’t produce earnings. They prove out gold claims and sell them to the larger producers.
Last but not least is silver, which just broke out last week over $20 and should pullback quickly into early August for a buying opportunity. Higher prices are projected into May of 2021 for silver. Silver is important because when it accelerates, it normally is at the tail end of a cycle advance and can be used to time a correction for the entire metals market. So when silver starts to move keep your eyes peeled for a correction in the entire metals complex in the weeks that follow. Get familiar with the rotation and timing of each of the major metals asset classes in order to help you time entries and exits during this next 4 year bull market in metals, in which you can potentially create tremendous wealth.
And when you're at a barbecue this summer and people are talking about why metals are going up, just remember: metals rise when people lose confidence in government, period end.
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