September 16, 2021: How to Hedge Against Global Uncertainty with Gold - Cabot Wealth Network

September 16, 2021: How to Hedge Against Global Uncertainty with Gold


The webinar was recorded September 16, 2021.


You can find the slides here.


Chris Preston [00:00:06] Hello and welcome to today’s Cabot Wealth webinar, How to Hedge Against Global Uncertainty with Gold. I’m your host, Chris Preston, Chief Analyst of Cabot Wealth Daily Advisory and Vice President of content here at Cabot Wealth Network. With me today is Clif Droke, Chief Analyst of our Sector Xpress Gold and Metals Advisory newsletter. Today, Clif is here to talk about why you need to have exposure to gold in your portfolio in this period of increasing fear and uncertainty and which stocks and ETFs can help you gain that exposure. This is an interactive webinar, which means we’ll be fielding your questions after Clif’s presentation concludes. So if you have a question, feel free to ask it at any time in the question box in your control panel, and we’ll try to get as many of them as time allows once Clif wraps up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio.

Chris Preston [00:00:57] First, let me introduce Clif. For over 20 years, Clif has worked as a writer, analyst and editor of several market oriented advisory services and has written several books on technical trading in the stock market, including Channel Buster, How to Trade the Most Profitable Chart Pattern and The Stock Market Cycles. Clif’s particular area of expertize is gold and other precious metals, which is why we launched our Sector Express Gold and Metals Advisory this May with Clif running the show as Chief Analyst. And today Clif is going to tell you about how and why you should be investing in gold right now. So let him do just that, Clif, take it away.

Clif Droke [00:01:36] Thank you, Chris. I appreciate the introduction. Let’s get right into it. This this has been somewhat of a challenging summer for precious metals investors. Precious metals haven’t been the strongest that we’ve seen in the past year. But on the other hand, there has been strength in other industrial and base metals that we’ll talk about a little bit later in the presentation. But right now, I want to talk about gold and why you should have what I call an anchor or a core position in your portfolio of gold at all times.

Clif Droke [00:02:09] Why own gold? Well, it has a five thousand year track record of safety, basically, it holds its value over time, regardless of any financial environment. Regardless of how much volatility there might be in the broad financial market in the stock market, gold has been known to be a safe haven whenever investors are afraid. That’s one of the first things they’ll run to when there is any kind of fear regarding the future outlook or the economy or the stock market. And it’s important to emphasize that fear is the primary catalyzing factor for gold prices. It’s more than anything else. The gold bull market is driven by investor fear. Good times are typically bad for gold, as we saw in the late 1990s, which were a time of economic, basically, the economy was white hot. The gold was trading at multi decade lows of around two hundred and fifty dollars an ounce. But on the other hand, bad times are good for gold, as we’ve seen off and on in the last 20 years, beginning with the turbulent 2000s after 9/11 and the the two front war in the Middle East, investors turn to the safety of gold and gold had one of its best, basically one of its biggest performances in decades.

Clif Droke [00:03:33] The fear cycle, there is a cycle of long term cycle, which many of you know as the Kondratiev wave or this 50 to 60 year K-wave, which largely influences commodity prices, gold tends to outperform at both ends of the cycle. There’s an inflationary end of the cycle and a deflationary end of the cycle. Gold does well in both. For instance, in the nineteen seventies when that K-wave was peaking, we saw runaway gold prices. Gold hit an all time high at that time of around eight hundred dollars an ounce. But then after that cycle peaked and we entered the nineteen eighties and nineties, we entered a deflation or a disinflationary phase of that cycle. Gold prices began to subside because there was neither inflation or deflation. So gold, it didn’t do too well during those two decades. But then with the onset of the of the 2000’s, we saw a resumption of gold strength. Why? Because deflationary undercurrents were beginning to show up. We enter the deflationary sector section of that 60 year cycle, and so gold consequently outperformed.

Clif Droke [00:04:43] Here we find the long term chart for gold, which really, more than anything shows in visible terms that 60 year cycle. We’re only seeing a portion of it. But you could see on the far left of the chart in nineteen eighty, you can see gold prices hitting that peak around eight hundred dollars an ounce. And then we see the disinflationary 80s and 90s or the K-wave cycle was declining. It bottomed out and once again we hit the up section of gold in the two thousands, this was a period driven by a mixture of inflation and deflation because we had, for instance, wartime inflation in the 2000s and then we had the deflation and the threat of deflation following the 2008 credit crash. Both instances caused investors to turn to gold, as you can see by this performance.

Clif Droke [00:05:42] This provides a picture of just how well gold has performed in each decade since the 1970s. As I mentioned, the 70s were characterized by runaway inflation or hyperinflation, and it had by far its best performance of our lifetimes, plus two thousand percent. The nineteen eighties were disinflationary. Gold was down 50 percent. The 90s were also disinflationary more or less, down twenty five percent. But again, with the onset of wartime inflation in the two thousands, gold was up three hundred percent. And with the post credit crash deflationary threat and the 2010s, gold was up 40 percent. The lesson here is that gold performs far better in inflationary environments than deflationary environments, as you can see by the performance of the nineteen seventies.

Clif Droke [00:06:35] What can we expect in the years ahead? Well, fear and plenty of it, we’ve entered a new decade of geopolitical, economic and global health worries, as we’ve seen in the last couple of years. Investors also are worried that we may have entered a stock market bubble. That’s going to become, I believe, an increasing fear. It’s it’s not a major fear yet because investors are still clearly bullish on stocks and they’re willing to take on that risk. But if you pay attention, you’re beginning to hear more and more talk in the financial media, people asking the question, are we in a bubble? I think that’s going to increase in the coming months and years. Inflation is also an increasing concern. That’s even more so than the stock market bubble talk. We hear about inflation every day. The latest consumer price indices and wholesale prices support the fact or support the view that inflation is an increasing concern going forward. For this reason and others, I expect the coming years to be very similar to the nineteen seventies that is characterized mainly by inflation. If that’s true, we can expect some pretty significant outperformance in the gold price in the years ahead.

Clif Droke [00:07:53] As a safe haven, gold has no peer. A lot of people – you hear increasing discussion that bitcoin and cryptocurrency have supplanted gold as the new safe haven of choice among today’s investors. Nothing could be further from the truth. Actually, crypto currencies are more of a speculative medium and they tend to basically increase and rise in price when investors are feeling more risk, willing to take risk and less risk averse. I’ve noticed that in times where the markets are increasingly volatile and stocks are in decline, cryptocurrencies usually decline with the stock market. So it’s by no means can you call Bitcoin or the cryptos a safe haven.

Clif Droke [00:08:36] Government bonds are a major safe haven and they do compete with gold because, as you know, Treasury bonds offer a yield while gold doesn’t. But even government bonds won’t have as much attraction with investors in the coming years because, frankly, yields are just at near all time lows. And the attraction, the yield attraction isn’t there. Stocks, as I’ve mentioned, or headed into nosebleed territory. So that’s another factor to consider. And for all of these reasons, I believe gold will come into greater prominence as a safety hedge as we move forward into this new cycle. This is just an anecdote, the men’s suit indicator, which I’ve always found interesting. Basically, it says that at any given time, the price of an ounce of gold should roughly correspond to a good quality men’s suit. This has been true for hundreds, if not thousands of years. At any given time, you can look at the price of per ounce of gold, which is currently around eighteen hundred dollars an ounce. You can get a good Armani suit for about that price. Back in the late 90s, when gold was all the way down to two hundred and fifty an ounce of two hundred fifty to three hundred an ounce, you can still get a pretty good quality Brooks Brothers suit for that price. So if you look back in time gold, this just goes to show that relative to inflation, gold holds its value and the men’s suit indicator is one example of that.

Clif Droke [00:10:01] Now, how much of your portfolio should we allocate to gold? This is the main focus of our presentation. There is a theory that says, it’s an admittedly conservative theory, it’s called the permanent portfolio, which suggests that investors should have as much as twenty five percent of their holdings in gold at all times. This should be considered the exception. I would say that it holds true for investors that are maybe around the age of fifty five and headed towards retirement and they’re not interested in taking on too much risk. You could use the permanent portfolio concept, which is basic, which is to divide your portfolio into quadrants twenty five percent in gold twenty five percent in bonds, twenty five percent in equities and twenty five percent in cash. And that allocation mix never changes. However, aggressive traders, people that like to trade quite frequently and are younger and not nearing retirement could probably get away with as little as maybe five or seven percent of your total portfolio in gold. But for the average investor, for most investors, a 10 percent anchor is ideal. That is, you should have at all times 10 percent of your total portfolio in gold – never goes below 10 percent, though there may be times when you could increase that which we’ll discuss. But 10 percent should be the minimum, or I should say the the core holding of gold in your portfolio.

Clif Droke [00:11:31] Why have an anchor at all? Well, as as I hope I’ve shown so far, gold reduces volatility in stormy markets. Any time we have choppy trading conditions in the equity markets or in other commodities, gold tends to hold its value. It’ll prevent your stock portfolio from showing abnormal volatility. It’s an anchor, because it keeps the volatility factor minimized, it also preserves your capital. A lot of times in the stock market, you may be tempted to over allocate or put too much behind various trades and you can end up losing a lot of money. But if you have that 10 percent anchor at all times, you know that it’s always going to be there for you. And for that reason, it serves as a discipline. It keeps you from overcommitting your capital.

Clif Droke [00:12:20] Now, you might be asking, should I own physical gold, actual gold coins and bars? My answer to that question varies. Basically, it depends on your situation. I typically don’t advise holding a lot of physical gold. The reason is because owning physical gold involves, in most cases, storage costs. You’ve got to find some way to store it safely, whether it be a bank vault or something or a gold storage vault. It’s also not as easy to sell if you really need to in an emergency. Gold is liquid, but when you’re having to sell physical gold bars, it’s a little more complicated. And also when you purchase physical bullion bars, you have to worry about getting an assay certificate to make sure it’s genuine. You can get stuck with counterfeit gold if you’re not careful, but if you do want to have some physical exposure, my advice is to go with U.S. And Canadian bullion coins, the ones, for instance, produced by the US Mint, the US Gold Eagles, in particular, they’re very liquid. They’re recognized around the world. And to me, it’s one of the better ways of holding physical gold.

Clif Droke [00:13:31] As far as gold ETFs, or I should say, as far as gold mutual funds, you can hold, you can have your 10 percent gold anchor in mutual funds, but again, they’re not as preferable because they’re not quite as liquid as some of the other assets will be looking at sovereign gold bonds are even less preferred for liquidity reasons. I recommend gold ETFs. This is the easiest way and also the most liquid way to own gold. The three most popular are the SPDR Gold Shares ETF (GLD), the iShares Gold Trust (IAU), and the GraniteShares Gold Trust (BAR). Actually, in my newsletter we use the GraniteShares (BAR) as our preferred gold tracking vehicle. ETFs offer an excellent way of owning gold and they’re extremely liquid. You could always get in and out if you need to, but it’s a it’s a simple way to keep most of that 10 percent anchored in gold.

Clif Droke [00:14:32] Another question I frequently get asked is, should you own gold mining stocks? Well, the answer is it depends. Should you own gold mining stocks as part of your 10 percent gold anchor? No, absolutely not. They’re too volatile over time. And the point of a gold stock – the point of gold mining stocks is to use them as leverage in a gold bull market when the gold price is rising and you want to get some additional, you want to get some additional exposure to gold, that’s the time to own gold stocks because they’re going to outperform the physical price of gold in a bull market. But the converse of that is when gold prices are weak, gold shares will typically decline even more in percentage terms than the gold price. So don’t use them in place of gold. Strictly for short and intermediate term trading purposes.

Clif Droke [00:15:26] When should you increase your gold holdings? Remember, we’re going to keep a 10 – the idea is to keep it at all times a 10 percent anchor or core holding of gold in your portfolio. But there are times you may want to go a little above 10 percent. And the answer to that is, well, it’s fairly obvious when gold is outperforming. If you’re in the middle of a rip roaring gold bull market, you probably want to have that extra exposure just to take advantage of the upside. There are five questions that you should ask before you decide whether or not to increase your gold holdings, and we’ll go through them. No one is gold outperforming equities, that is is the price of gold outperforming the benchmark S&P 500 index. If the answer is yes, you probably want to commit more to gold, at least in the intermediate term. Is gold outperforming the 10-Year Treasury Yield Index? Now, remember, we talked about how gold competes with Treasury bonds because of bonds offering a yield while gold does not offer you. So when yields are rising, this typically puts downward pressure on gold because investors are attracted more to the the rising yield of the Treasury market. So you want to see gold outperforming the 10-Year Treasury Yield Index (TNX). If gold is outperforming that index, you definitely would consider adding more gold.

Clif Droke [00:16:48] Are platinum and palladium leading gold? Now, platinum and palladium, you may think, is a completely unrelated market, but for whatever reason, they both serve as leading indicators for gold, particularly platinum, when the price of platinum is significantly weak, gold typically follows suit. When platinum price platinum prices begin to rise on a sustained basis, gold typically follows platinum lead. So you always, as a gold investor, should look at platinum and palladium and see if they’re confirming strength or weakness in gold.

Clif Droke [00:17:25] The next question is, is silver leading or at least confirming gold? Silver is the sister metal of gold. It’s an alternative to go because it is considered a precious metal and somewhat of a safe haven. And because of its cheap price relative to gold, a lot of investors will use it to leverage a gold bull market. So ideally, if gold is in a bull market, silver should be participating. If Silver is not confirming a rising gold price, there’s probably a downside surprise ahead for gold. So you should be very careful.

Clif Droke [00:17:57] And finally, is gold outperforming commodities in general? And to measure this, you look at the CRB commodity index. This is the most important of the five questions. Gold should be outperforming other commodities like agricultural commodities, energy, oil and gas and so forth. It should be outperforming the broad commodities market. When it does, it means you are generally safe in owning a little more than 10 percent gold.

Clif Droke [00:18:25] If you can answer yes to four of the five questions we just asked, the answer is yes, you should probably increase your gold holdings about 10 percent. But remember, this question should only be should be asked in view of a quarterly performance. That is, you need to see at least three months of outperformance before you agree or before you decide to increase your gold holdings. A few days or a few weeks isn’t sufficient. Three months or one quarter is a sufficient period.

Clif Droke [00:18:55] The most important of the four of the five questions is gold’s relation to treasuries and commodities. I mentioned the commodity one, but also gold should be outperforming the 10 Year Treasury Yield Index (TNX) before you decide to commit more capital. And finally, when gold is outperforming the S&P 500 along with the other markets, treasuries and commodities, it is a super buy. It means gold has – you are definitely justified in increasing your allocation to gold, because when gold is outperforming stocks, it means there is a lot of fear in the air. And remember, gold is driven by fear. So typically gold has nowhere to go but up in that environment.

Clif Droke [00:19:37] Here are some examples, some chart examples of how you can answer these five questions. If you want to do this, you can go to stockcharts.com for free and type in, as you see on the right here in the upper left, the symbol on stock charts for gold is dollar sign gold and then you do colon, dollar sign, SPX, so “$GOLD:$SPX”. That gives you the relationship between gold and the S&P 500. And as you can see, this ratio chart here, this ratio graph between the year two thousand and twenty eleven basically just went up. And this underscores that that was a bullish decade for gold. Gold outperformed the 10 Year Treasury or excuse me, gold outperformed the S&P 500 index for most of that time. So it was definitely a time to have some bullish exposure to gold.

Clif Droke [00:20:29] Here we have gold compared to the 10-Year Treasury Yield Index (TNX), again, the symbol for that at stockcharts.com is dollar sign TNX, “$GOLD:$TNX”. And again, this is from the year two thousand to twenty eleven. Gold clearly outperformed in that decade. So you wanted to have that extra, more than 10 percent exposure to gold.

Clif Droke [00:20:53] Here is goal or I should say, here is the platinum price. This is not gold versus platinum, it is just the price of platinum between the years 2000 and 2011, and, as you can see, except here, in the year 2001, it was outperforming gold for most of that decade. Actually, if you can look in the year 2000, this was the leading signal for gold. Gold was not rising in the year 2000, but the platinum price had a significant leap. And that was the leading indicator that gold was about to turn up, which it did. And for most of this decade, it outperformed gold or I should say confirmed strength in gold, with the exception of that brief 2008 credit crash.

Clif Droke [00:21:38] Here is gold versus commodities. Remember, I said this is the most important of those five questions is gold outperforming the broad commodities market? The symbol for this is on stockcharts.com is dollar sign, CRB, so “$GOLD:$CRB”. That’s ($CRB) the CRB Commodities Index. Now, this is an interesting graph because between the year two thousand ah excuse me, two thousand one and two thousand five, you’ll see that while gold did technically outperform commodities, it wasn’t by a significant factor, more or less, this graph went sideways in those years, and that’s because gold’s bull market didn’t really accelerate until after two thousand five, as you can see, and the subsequent years by the rise in the chart. So this gives you an idea. If you always look at the relationship between gold and the CRB, it can tell you the magnitude of how much gold is outperforming commodities and whether you should have that extra exposure. And clearly between the years 2006 and 2011, added extra exposure was warranted.

Clif Droke [00:22:47] The opportunity ahead for gold. I just wanted to give you a few reasons why I do see opportunity in the coming years for gold investors. For too long, gold has been neglected and undervalued. So for that reason, gold could almost be considered a value play. I think eventually gold will begin to attract value oriented investors because it has been depressed for the better part of the past year. Its allure, I believe, will grow along with society’s fear. We’ve got lingering geopolitical concerns. There are going to be growing concerns about the stock market being in a bubble, potentially being in a bubble. We’re going to see more concerns, I believe, about the strength of the economy. And as we enter another cold and flu season, there may be revived fears over Covid. All of these things, I believe, will combine to give gold an attraction as a safe haven. Moreover. Nothing holds its value like the metal, as I’ve emphasized here, so that’s also, obviously a long term reason for having a core holding of gold. Now, there’s also a demographic reason millennials, the great millennial generation, hasn’t yet discovered gold. In fact, they seem to shun it in recent years, and that’s because they’re enamored with cryptocurrency. I believe eventually cryptos will fail them. When they realize that crypto currencies are not a safe haven in times of turmoil, I believe they’ll eventually discovered gold much as they have recently discovered the stock market. So if we do get that giant, that massive shift of millennials coming into the gold market, their combined purchasing power could really add to gold’s upside attraction. And finally, gold always has a place in your portfolio, regardless of the investment climate.

Clif Droke [00:24:32] Now, I wanted to turn to just three quick investing ideas. These are precious metals and base metals stocks. Again, this has nothing to do with gold itself. These are just short to intermediate term ideas that you may be interested in. We’re going to look at Barrick Gold (GOLD), Teck Resources (TECK) and Alcoa (AA). These are stocks that I cover in my newsletter. Barrick Gold. If you wanted to own just one single gold company, it would probably be Barrick. It’s a senior gold mine. It’s one of the most established gold companies, certainly in North America. It’s well known and the second largest gold mine in the world. It’s also enjoys almost all-in sustaining costs, one thousand eighty seven dollars an ounce. What that means is it’s able to mine gold far cheaper, far more cheap than the current eighteen hundred dollars an ounce. It’s a considerable discount. It’s also in the process of disposing or paring of non core assets and slashing long term debt. And it’s got an excellent management team and a 10 year plan to become the world’s most valuable gold mining company. From what I’ve seen, I believe they have an excellent opportunity to achieve that. Here’s the chart of Barrick. It’s not – this is by no means a momentum play. Barrick has been weak lately, and it may not we might still see some additional short term weakness, but the value is clearly there and I think – certainly in this current milieu with more investors are going to be taking a closer look at Barrick as a value of potential value play.

Clif Droke [00:26:07] Teck Resources. This is a good way to have exposure to multiple metals, precious and base. Teck is involved in gold, silver, it’s involved in metallurgical coal. It’s involved in oil sands and a host of other metals. But really, its calling card is copper. Booming EV demand, demand for electric vehicles, copper supply woes and alternative energy demand for copper has combined to create a perfect storm for the copper market. And as Canada’s largest and most diversified resource company, Teck is perfectly poised to benefit from this. It has one of the best copper production growth profiles in the industry and it will, I believe, benefit from sustained electric vehicle growth and alternative energy growth. Here’s a chart of Teck, and as you can see, this is much more a momentum play than a value play. I look I see it as having intermediate term upside potential, and I define the intermediate term as roughly six to nine months ahead. It should benefit with stronger copper prices, but also to some extent, if we see stronger gold and silver prices.

Clif Droke [00:27:22] And finally, Alcoa, which as many of you know, is one of the world’s largest aluminum producers, at one time it was a Dow 30 component. It’s expected to see higher free cash flows going forward. Aluminum. The reason I mention this is because aluminum is one of the strongest performing metals right now. It’s far outperforming gold in the short term. And this Alcoa is an excellent way to get some exposure to aluminum. There’s also going to be an anticipated increase in more automotive demand for the metal. The automotive market is quite hot right now, as many of you know, and that should be good news for aluminum. And the growth potential, as industrial metals in general, especially from the booming auto and also from the EV market, will help Alcoa. Here’s a chart, as you can see, and again, this is more a momentum play than a value play, but I believe the intermediate term momentum is secure and we should see higher prices in Alcoa in the six to nine month period ahead. Well, that concludes my presentation, and with that, I’ll turn it over to Chris. Thank you very much.

Chris Preston [00:28:35] Yeah, thanks, Clif. Yeah, I’ll give you a minute to catch your breath before we get to some questions. And again, if you have questions, now’s the time to ask them if you haven’t already. First, I just wanted to tell you that if you like what you heard from Clif so far today and are interested in signing up for his SectorXpress Gold & Metals Advisor newsletter, you can visit the website that’s on your screen right now for a charter subscription. That’s Cabot Wealth.com/webinarspecial. What you get in return is immediate access to Sector Xpress Gold & Metals Advisor portfolio so you can see current recommendations, twice monthly issues with our latest featured stocks, specific recommendations and updates and all assets in Clif’s portfolio, including buy, hold and sell recommendations, weekly updates and alerts featuring the latest news and opinions from Clif on our current investment recommendations and general market conditions, plus two free premium reports, three top metals stocks and ETFs to buy in 2021 and seven insider’s tips for profiting safely in gold and metals. Again, you can subscribe now by going to CabotWealth.com/webinarspecial.

Chris Preston [00:29:53] Now let’s get to your questions. Let’s see. First question is from Arthur. Arthur asks Clif, do you do you compare gold ratios to oil or the Dow Jones?

Clif Droke [00:30:09] I compare gold ratio, compare gold to the S&P 500. You could do the Dow Jones, but I believe the S&P 500 is more representative of the broad market. It’s not quite as narrow. It’s less narrowly focused. And as far as do I compare gold to oil, that’s a good question. At one time I did. You can still do that. Actually, there was once a saying that back, especially about 10 or 15 years ago, a lot of gold investors were saying gold boils in the soup of petroleum. That is the implication being oil prices lead gold. That’s not necessarily true anymore. So I consider oil less of a of a leading indicator, but it does reflect inflation. So if you’ve got a sustained rise in the oil price, typically gold will follow follow suit on the upside.

Chris Preston [00:31:05] OK, let’s see, with all the talk of inflation right now, why hasn’t Gold responded to it by going higher?

Clif Droke [00:31:14] Well, I believe there’s not enough of it. Basically, as I’ve emphasized in the presentation, gold is driven by fear, profound and sustained fear. Right now, there’s not enough fear in the market. Basically, people are in the stock market. We’ve seen based on the investor sentiment polls, there’s not enough bearish sentiment out there. People still are willing to take on risk. They’re still in cryptocurrency, they’re still in stocks. And until they basically get spooked and look for the sidelines, because if the market increases in volatility, we get a big downside move. I think that will move the needle on gold. But right now, short answer, there’s not enough fear and specifically not enough fear of inflation to really push gold prices significantly higher. I think that will change, but we’re not there yet.

Chris Preston [00:32:05] OK, you mentioned Silver. What will it take for Silver to turn around?

Clif Droke [00:32:12] That will take a goal, turn around. I don’t mean to imply that Silver always follows Gold’s coattails. Sometimes it leads, but typically a booming gold market will pull silver along with it. In the early 2000s, when gold began its major bull move, it took a few years for silver to really catch on. And what happens is when it’s clear that gold prices are moving higher in a sustained fashion, institutional investors and small investors will look at silver because it’s an excellent way to leverage a gold bull market and they’ll go in and start buying it up because it’s so much cheaper than gold. So basically, the answer is gold has to show more strength before I believe silver shows corresponding strength.

Chris Preston [00:32:57] Yeah, we had a follow up question about silver, I think this may have been asked right around the same time. What will it take for Silver to move significantly higher March 2020 silver crumbled almost 50 percent. Rates are going higher. Silver is dropping almost 30 percent. You say gold is really what will trigger trigger it?

Clif Droke [00:33:17] I think so. Gold has to show strength before silver has any reason to rally.

Chris Preston [00:33:24] OK, let’s see what else we have- Do you mind advancing to the next slide there, Clif?

Clif Droke [00:33:31] Sure.

Chris Preston [00:33:32] This question, in view of the current gold market environment, would you favor buying gold mining stocks that are deeply oversold and undervalued or gold stocks that have already established forward momentum and are trending higher?

Clif Droke [00:33:47] I would favor – that’s a good question. It depends on what kind of a market you’re in. If you’re – if the XAU – I use the XAU index, the Philly Gold Index as a barometer for the broad stock market or excuse me, for the gold stock market. So if gold stocks in the aggregate, as measured by the XAU have been declining for several months, I would favor value oriented stocks like Barrick. In other words, stocks that have basically been going down, because once that index turns around, obviously once the gold market bottoms out, the gold stocks are going to follow higher. You could take a relative strength approach and look at the gold stocks, at the handful of gold stocks that are going up right now on the assumption that they’re showing relative strength and will go even higher. But I think the best play is when the market is in decline. You favor value stocks over momentum stocks.

Chris Preston [00:34:43] OK, we’ll do a couple more questions. What do you view as the strongest metal or metals right now, i.e. metals that have the most intermediate term upside potential?

Clif Droke [00:34:55] Well. I could say, excuse me, uranium is one of them, but for me it’s lithium, the battery metals are very strong. They have been strong and I believe they will continue to be strong based on that in demand EV market that I mentioned in the presentation, the demand right now for electric vehicles and batteries is just it’s off the charts and I think that’s going to drive lithium prices higher. So my answer to that would be lithium.

Chris Preston [00:35:24] Right and as the name of your advisory, your newsletter suggests you’re not just it’s not just about gold, it’s gold and metals advisor. So you cover all medals there.

Clif Droke [00:35:34] Exactly.

Chris Preston [00:35:35] What… Here’s another one that just came in. What is your long term price for gold and silver?

Clif Droke [00:35:43] I don’t set price targets. I believe – basically following the major trends and I let price take care of itself, so to speak. I do believe I think at our last conference I said a conservative upside one year target of around twenty two hundred for gold. I believe that’s what I said. But, you know, to be honest to me, price targets for gold are like throwing darts at a dartboard. I think the most important thing is to examine the fundamentals and capture the main trend, and the price will take care of itself. So if we if we do get the gold bull market that I’m forecasting, it could go a lot higher than that.

Chris Preston [00:36:24] OK, and do you ever recommend Penny mining stocks in your newsletter?

Clif Droke [00:36:32] As a rule? No, but occasionally if I see a special value, I did recommend a penny mining lithium stock a couple of months ago that did really well. And I believe it’s called Sigma Lithium. So and by penny, I don’t I don’t ever buy penny stocks, but if they’re like a dollar to five dollars, I would classify that is as a penny stock. Anything less than a dollar I won’t touch. But yeah, occasionally we will go into low priced OTC stocks.

Chris Preston [00:37:06] OK, well, thanks, Clif, and thanks for the questions today and everyone for tuning in. We’ll be back next month with a webinar from our Brendan Coffey, Chief Analyst of our Sector Xpress Greentech Advisor, where Brendan will be talking about three stocks to play the coming American solar boom. That’ll be at two p.m. Eastern Time, same as today on Thursday, October 21st. So come back for that. And that does it for us, for Clif Droke and the entire Cabot Wealth Network team, I’m Chris Preston, and we’ll see you next time.

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