What’s Next for Gold

Last week, Taylor, who is one of our long time FA subscribers, called in and I immediately noticed a nervous tone to his voice. He said that he had been out of the office for a couple weeks because he and his wife just had their first child.

Taylor explained that he was now “out of the loop” and on his way to meet one of his largest clients who was primarily invested in stocks and corporate bond funds, but this client also asked about gold every time they met.

Unfortunately, he hadn’t had a chance to read The Sevens Report since the baby came along and asked,

“What do I need to know about gold?”

In the next few minutes I walked Taylor through our most recent analysis of the precious metals market and our growing optimism about gold (which we have included below).

Now, Taylor told me that he doesn’t trade or invest in commodities for his clients very often but that they always seem to ask him about the sector and if there were any opportunities there.

Sophisticated, ultra-high net worth clients want to see their advisor watching more than just the stock market, and our daily research helps our subscribers demonstrate to those types of clients and prospects that they understand all markets, not just stocks.

The Sevens Report is the daily market cheat sheet our paying subscribers use to keep up on markets, seize opportunities, avoid risks and get more assets.

Our analysis is helping our paid subscribers (which are some of the most successful advisors, RIAs and portfolio managers in the industry):

1. Show they are watching all asset classes to help protect portfolios and outperform

2. Demonstrate to their sophisticated clients and prospects that they don’t just rely on “Perma-Bull” research from the firm’s CIO and

3. Navigate these volatile markets.

We firmly believe we offer the best value in the independent research space.

Every day at 7 AM we provide analysis for our subscribers of all markets:  Equities, Commodities, Currencies, Bonds, and any important Economic Data, because it all effects client portfolios.

We know this because just recently, an advisor from Florida at a bulge bracket firm called to personally tell us that sharing The 7:00’s Report with one of his larger prospects helped him land the $25 million account!!! 

He said the independent analysis provided talking points for him to discuss in the meeting, and it helped show his prospect that he was knowledgeable of all asset classes, not just stocks and mutual funds.

We want everyone to have the best year possible, so in that spirit we have included an excerpt from the research that was sent to our paid subscribers at 7 AM last Thursday morning.

Is Gold a Buy? (Sevens Report Excerpt)

Since “washing out” to multi-year lows back in July, gold has been trading better and has been getting more attention from different research shops, investment banks, and as a result the financial media. We too have been watching gold since it began attempting to “put a bottom in” around the $1100 area. Gold is a finicky commodity though, which is famous for throwing traders “headfakes” so we were hesitant to make an all-out “long-gold call” until last week.

Near Term Fundamental View:  Gold, which is perfectly flat on the year as of this morning, has been pressured by continued prospects of a rate hike in 2015. Looking back at the trading year, the selling pressure has been consistent all year as a rate hike was continually being priced in for the “coming months.” And although the Fed has continued to “kick the can” on the issue, they kept promising a rate hike “next time” which caused on going “hawkish pressure.”

But, for the first time, the markets are starting to price-out the likelihood of a 2015 rate hike which has had a dovish influence across asset classes, especially in gold. We believe that gold futures remain oversold here because of the constant pressure that the Fed has kept on precious metals with their habit of over-promising and under-delivering with regard to rate hikes, and therefore we are near term bullish on gold prices as Fed outlook remains far from certain.

Long Term Fundamental View:  Looking further down the road, say 1-5 years out, the risk reward scenario of buying gold at current levels is favorable, and here’s why.

Everyone wants the Fed to raise rates except for the Fed apparently, as they back-step from earlier, seemingly confident telegraphing of a rate hike. One of the key reasons for the delay that they continue to cite is inflation. But, if the Fed raises rates, especially in a one and done manner, and we continue to see inflation rise, which will be bullish for gold as it will return to its historic role of an inflation hedge in investor portfolios.

But, looking at things from the opposite point of view, the worst case scenario is that inflation remains subdued and concerns of global deflation increase again. At that point, gold will go down. But, if there is a true global deflation scare, given current levels in both gold and stocks, gold will not be a “bad” place to have capital invested as precious metals should outperform stocks in such a deflationary environment (note: the dollar would be the only safe place in such market conditions).

Technical Outlook: The technical picture for gold has been improving since futures plummeted in late July on hawkish Fed expectations thanks to a speech by Yellen and soft physical demand out of China.

Since then, gold has held those breakdown levels below $1100, made a series of “higher highs and higher lows” which has resulted in a near term, bullish trend higher. And, futures are currently breaking out through multi-year downtrend resistance.

Looking ahead, the market is getting a little “hot” here and we are likely due for a profit-taking pullback. But, such a “dip” to anywhere between $1145 and $1155 should be looked at as a buying opportunity.

How to Gain Exposure

We are in good company with our bullish stance on gold here as Morgan Stanley just released a report revealing an “attractive” outlook on precious metals and related mining companies. Their bet suggests that commodities will rise an expected 19% over the next 12-15 months and equities with exposure to the space are poised to outperform.

We believe that the key to benefitting from this potentially long term, macro-shift in fundamentals is buying the right ETF’s for your clients. And our subscribers already have them and have been discussing the long opportunities in gold with their clients and prospects this week as futures continue to rally.

As a courtesy, I am extending a limited time, special offer to new subscribers of our full, daily report that we call our “2 week grace period.”

If you subscribe to The 7:00’s Report today, and after the first two weeks you are not completely satisfied, we will refund your first quarterly payment, in full, no questions asked.

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Best,
Tom

Tom Essaye,
Editor of The 7:00’s Report

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