This Bargain Buy (Right Now) Will Surge When the Market Crashes

Matthew Carr By Matthew Carr, Emerging Trends Strategist, The Oxford Club

Metals

It’s like an annoying song set on repeat…

“I’m not calling for a crash per se, but now’s the time to be cautious…”

“Investors aren’t buying low and hoping to sell high. They’re buying high and hoping everything heads even higher.”

“We see at least a correction on the horizon…”

For nearly a decade, there’s been a constant drumming that the market is going to crash any minute. Investors, beware!

I know people who have sat on the sidelines for years because they believe a collapse is going to happen at tomorrow’s open.

I remember reading dire warnings in September 2009. They claimed the markets had rebounded from their lows in March 2009 too quickly… that a minimum 20% sell-off was in store before the year’s end.

In other words, some have called for a market collapse every single day since March 9, 2009 – the day the market started ticking higher again. There are even some who have said the market is going to crash every single day for decades.

Well, a broken clock is right twice a day.

This year, the markets have already set 35 new all-time highs. And that’s after years of setting so many new highs that we stopped keeping track.

Admittedly, I understand if investors think it’s a little frothy out there.

But as long as more people claim a market crash is on the horizon than those who say the Dow is going to 36,000, we’re OK… for now.

When everything is soaring, I’m always on the hunt for cheaper opportunities. And there are plenty out there…

Flat in 2017: A Golden Opportunity?

The market’s record highs, coupled with record prices for cryptocurrencies like bitcoin and Ethereum, have really kept gold in check.

But I’ve found the precious metal intriguing in 2017. When we take a look at what the price of gold has done for the year, we find it hasn’t done poorly…

The SPDR Gold Trust ETF (NYSE: GLD) is up about 11.5% for the year as of Thursday. Until tensions surrounding North Korea ratcheted higher this week, it had been trailing blue chips on the Dow Jones Industrial Average for most of the year, and its performance is still several percentage points lower than the Nasdaq’s year to date.

Looking at the demand numbers, we can see sentiment toward gold is murky. This is understandable, with so many other investments rocketing to new highs.

So it shouldn’t be a surprise that in the first half of 2017, gold demand fell 14% year over year.

Total investment demand for gold was down 34%. This was largely because buying from gold-backed ETFs collapsed 76%.

That’s not as bad as you might think…

In 2016, the world was in full-blown freak-out mode for the first nine months. First there was Brexit, and then, of course, the U.S. presidential election. Gold-backed ETFs gobbled up record amounts of gold, and the price of the precious metal surged.

Then everything reversed course following the election.

But political uncertainty is still driving gold’s price.

Though gold demand was largely tepid for the first half of the year, there were some hot spots sparked by events in Washington, D.C.

In Europe, gold-backed ETFs hit an all-time high in the second quarter. And the tonnage held in these funds soared to record highs, driven by another U.K. election.

Event risk and political uncertainty are still the main price movers for gold… Gold bugs, meanwhile, hate to acknowledge that and believe gold continuously outperforms the markets.

Because there’s slack in gold demand, we’ve seen global gold supply fall 8% in the second quarter. Gold recycling is down. Mining is flat.

The VanEck Vectors Gold Miners ETF (NYSE: GDX) and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) have lagged the price of gold in 2017…

Earlier this year, when the Dow struggled, the VanEck Junior Gold fund rocketed more than 30%. But besides that surge, the fund has been basically flat for the year. It has ticked up only in the past few days – again, all due to anxiety over North Korea.

For those investors looking for exposure to gold at a value, I like junior miners – specifically Canadian miners – in this environment. Canada is one of the only areas where gold production has increased thanks to new mines like Hope Bay and the much-anticipated Brucejack.

One day, the market is going to collapse. That’s a fact. And that’s why so many people have built careers around saying the market is going to crash every single day… because eventually it will.

And when it does, the price of gold will soar.

Good investing,

Matthew

P.S. I want to extend you a cordial invitation to a very special event…

It’s called the Wealth, Wine and Wander Retreat, and it’s happening January 18-22, 2018, at The Inn at Rancho Santana in Nicaragua.

Joining me will be Oxford Club CEO and Publisher Julia Guth, as well as Options Strategist Karim Rahemtulla and Macro Strategist Eric Fry.

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