Safe havens are rising. They are outperforming U.S. stocks. Safe havens include gold, silver, the Japanese Yen, and U.S. Treasuries.
Markets rise and fall with trends. Typically, a trend send a group of assets higher and another group of assets lower. Since last summer stocks have been trending higher driven by a rise in interest rates (in the U.S. and Europe). Because of that, gold and silver have struggled (basically they were trendless).
Right now we see another trend arising:
- Safe havens are rising: gold and silver are breaking out, the Yen is on the rise and close to a breakout, U.S. Treasuries are also close to a breakout.
- Because of that, U.S. stocks are struggling.
- Emerging stocks are doing great as capital flows out of U.S. stocks and are channeling their way to other stock markets.
Below chart makes the point, and is representative for Treasuries and Yen (they all have similar chart setups). If gold manages to break above the $1350 to $1370 area it will be a mega breakout. It will confirm a new market trend, with new intermarket dynamics. Safe havens will outperform U.S. stocks. The safest place for stocks will be emerging markets, and, potentially, some European stock markets.
As money flows into safe havens we expect this trend to hold for 6 to 12 months. A safe way to play this safe haven trend is buying gold. A leveraged way to play this trend is buying silver or, even more risky, silver miners (for instance SIL ETF). A very conservative way to play this trend is buying U.S. Treasuries.
When will this new trend be invalidated? If gold cannot break above $1350 to $1370 and if the Yen does not higher from here.
However, if they continue to move higher, we expect this trend to hold for several months. Most gains are made in the first months of a new trend.
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