Gold Continues to Shine in 2024
As the world’s top investment manager, I am thrilled to report on the incredible performance of gold in the year 2024. Year-to-date, the price of gold has soared from 2072 to 2709, settling at 2681 at the end of last week, marking a remarkable gain of +29.4%. This impressive performance has solidified gold’s position on the podium in our BEGOS Markets Standings for this year.
Silver Takes the Lead
Not to be outdone, silver has taken the lead among the precious metals, surpassing its counterparts in terms of relative undervaluation. Despite gold reaching record highs, both metals are still considered inexpensive due to currency debasement. In fact, gold is currently -28% below its debasement value, while silver is attractively priced at -18% below the average Gold/Silver ratio of 68.5x.
- Gold at 2681 is -28% below its debasement value of 3739
- Silver at 31.92 is -18% below the average Gold/Silver ratio of 68.5x
- Based on the average ratio, silver should be priced at 39.16
Gold’s Impressive Performance
Gold’s year-to-date gain of +29.4% over the 187 trading days in 2024 is its best percentage increase in the last 24 years. This outstanding performance highlights the strength of gold as an investment asset, especially during times of economic uncertainty.
Analyzing Gold’s Valuation
While gold continues to soar, it is essential to consider its valuation relative to other assets. The Market Value chart of gold from the past year shows that gold is currently priced at +148 points “high” compared to its smooth valuation line. This overvaluation suggests that a correction may be on the horizon, despite gold’s strong performance in recent months.
Equities Performance
Tracking gold along with key equities such as Agnico Eagle Mines, Global X Silver Miners ETF, and Pan American Silver reveals varying returns for investors. Diversification across different assets can help mitigate risks and enhance overall portfolio performance.
Impact of Federal Reserve Actions
Following the Federal Reserve’s recent rate cut, the BEGOS Markets have shown mixed reactions. While six out of the eight components have moved higher, bonds and oil have lagged behind. The Fed’s decision to cut rates has implications for investors across various asset classes.
Inflation and Economic Indicators
As inflation remains a key concern for investors, monitoring economic indicators such as the inflation summary for August can provide valuable insights. The Federal Reserve’s actions and economic data releases play a crucial role in shaping market sentiment and investment decisions.
Forecasting Gold’s Future
Looking ahead, gold’s structure by its monthly bars over the past 16 years reveals a potential path towards the coveted “Big 3000” level. While near-term valuation concerns exist, historical trends suggest that gold could continue its upward trajectory towards new highs.
Stock Market Warning
Despite the positive outlook for gold, it is essential to remain cautious of potential market risks. Economic uncertainties, geopolitical events, and changing monetary policies can all impact investment performance. Staying informed and diversifying across asset classes can help navigate market volatility and protect wealth in the long run.
By combining technical analysis, economic insights, and historical trends, investors can make informed decisions to achieve their financial goals and secure a prosperous future.
**Is the Stock Market Flying Too High? A Warning for Investors**
*Image: Economic Barometer*
The stock market has been soaring to new heights, with the S&P 500 breaking records. But is this bullish trend sustainable, or are we headed for a crash?
### Stock Market Valuation Warning
As financial experts have been cautioning, the stock market is overvalued based on historical earnings metrics. Here are some key points to consider:
– The current price/earnings ratio of the S&P 500 stands at a staggering 29.2x, with a cap-weighted P/E of 42.3x using trailing twelve-month earnings.
– In bull markets, the average P/E level should be around 15 to 18 times earnings, indicating that today’s S&P levels require a significant increase in earnings to justify current valuations.
– The market capitalization of the S&P 500 is $50.3T, while the available money supply is only $21.2T, raising concerns about the market’s liquidity.
– Without the monetary infusion prompted by COVID, the S&P would likely be hovering around 3000, significantly lower than its current level.
– Geopolitical disruptions and other uncertainties add to the market’s vulnerability.
### What Could Trigger a Correction?
The catalyst for a market correction has historically been fear, exacerbated by sensationalist reporting in the financial media. With many first-time investors in the market, the potential for panic selling and significant losses is a real concern.
### The Road Ahead
Awareness of market overvaluation is growing, with prominent figures warning of a potential correction of up to -50%. While opinions vary on the severity and timing of a correction, it’s crucial for investors to exercise caution in these uncertain times.
In conclusion, investors should remain vigilant and consider the risks of an overvalued market. By staying informed and prepared, they can navigate potential market turbulence and protect their financial future.
[Source: Krugman, 02 May ’01]