My Summer Investment Strategy (And Why I’m Buying)
@TheGoldAdvisor · · 4 upvotes · 0 replies
My Summer Investment Strategy (And Why I’m Buying)
-Jeff Clark, TheGoldAdvisor.com
Gold and mining stocks peaked in January and have been in consolidation mode ever since. Gold has fallen as much as 20% and GDX (Gold Miners Index) 31%. The junior miners index, GDXJ, is down 34%.
These are healthy and normal corrections in a bull market.
But how do we know another major up-leg is coming?
Answer that question and your investment strategy becomes clearer.
There are a number of ways to calculate that, but here’s one you may not have seen elsewhere and is very compelling…
What is evident is that this is not the 2011 bull market, but one that is more comparable to the 1970s. And when you look at that comparison you begin to see what could still be ahead, which tells us how to invest.
First, here’s the correlation of our current bull market (gold line) to the one from 1976 to the peak in 1980 (black line). And notice the correlation coefficient—through June 1, we are tracking the 1970s bull market by 95%!
This is a very high correlation, one you don’t see very often.
And look at the potential rise in the gold price—it would have to climb 2.6 times more to match the 1980 peak. That would put it over $11,600 an ounce. I’m not saying that’s where gold is going but merely pointing out the potential with a prior bull market we closely match.
Some of you will say the bull market started in the early 1970s. Okay, let’s compare to that period…
The correlation is still 93%. And the potential is almost a four-times rise in the gold price, which would put it close to $18,000 an ounce. Again, that’s not a prediction but an acknowledgement of the potential when compared to a prior bull market we closely resemble.
This data directly hints at our investment strategy…
If you accept the likelihood that gold is ultimately headed higher at some point, mining stocks will follow. Many will outperform gold. That means…
• Dips are buying opportunities
• Second chances are available on stocks you missed
• We can buy new companies with greater confidence.
That’s what I’m doing. I personally continue to invest aggressively. If I relyon history and data and trends, then the bull market has much more to give.Here’s where my dollars are going right now.
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