There are in increasing number of signs that gold (GOLD) will outperform in the coming months and year(s). We wrote about this at length in our top gold stocks 2019 update. Not only is the gold chart suggesting a bullish gold prediction on the short to medium term, the more fundamental aspects are also underpinning a bullish gold outlook, one of them being rising inflation expectations for 2018 and 2019. All this is reflected on the gold stock chart, and, admittedly, we can only conclude that our gold stocks forecast for 2018 is bullish, this is why.
Gold stocks forecast 2018
The gold stocks index GDX (GDX) has an amazing setup. Its 10-year chart makes the point. Especially the 2 green circles show a breakout attempt, once in 2016 and once early 2018. This, of course, is the first set of signs of a new bull market, or, at least, a bullish environment.
What is interesting though is the the GDX ETF may already be trading above its falling channel, which, in plain simple terms means it is already in a bull market, the HUI gold stock index is still not that far.
But we believe it is a matter of time until the new bull market is confirmed because of this observation: gold stocks are as flat as they can be, and they are already for 3 months now. That’s a never seen ‘event’ (or lack thereof), at least not in the last ten years. Gold stocks tend to be extremely volatile, but 3 months of a flat trading is very unusual.
What does this mean to us? It implies that, provided this absence of volatility continues, both the GDX and the HUI gold stocks indexes will be in breakout area. That is because they are moving away from their downtrend line.
Moreover, as both the Inflation Outlook for 2018 suggests rising inflation expectations and as we are in a risk on investment climate in 2018 we know from history that it is a great environment for precious metals, and particularly gold stocks, to thrive. Think of the 2002 time period, as well as 2010.
Note as well that we observed recently that Risk On Is Returning in the gold market which is one of those bullish indicators for gold stocks in general.
