This Is How Collapsing Bond Yields Turn Mining Stocks And The GDX ETF Into Safe Havens – Mike Swanson (08/14/2019)

I first started to talk about the moves in the bond market way back last summer when the yield on the 10-year Treasury bond fell below that of the 3-month bond, but now with the two and ten year US Treasury bond nearing inversion it is catching the attention of everyone. If you turned on CNBC yesterday you may have noticed the ticker they had on the screen of the yield on the two year bond as if this is now some kind of countdown.

People worry about it, because such an inversion is the most reliable indicator of a recession starting six to twelve months in the future that there is.

But one thing these CNBC people say that I think is dead wrong is some of them claim that you cannot invest in gold. One of their arguments is that gold doesn’t pay any interest like you can get from a bond so it can’t be used as a safe haven.

They talk like it is is “dead money” even though the gold market has outperformed the stock market so far this year.

Since the start of the year to today the GDX gold stock ETF is now up 34.92% while SPY is only up 17.01% – and you have to remember that big return in the S&P 500 came only after a 20% decline!

The key to beating the market is to be in the best stocks in the best sectors that are outperforming the market averages. Take a look at the GDX VanEck Vectors Gold Miners ETF that trades on the NYSE.

Yes I own GDX.

Here is the funny thing though right now the yield on the ten year Treasury bond is 1.68%.

If you don’t think you can buy gold because you can’t get a yield on it then please consider this — that 1.68% yield for US government debt is now so small that there are big cap mining stocks that now pay a bigger dividend than that!

So if you think you can’t buy gold as a safe haven because it doesn’t pay interest you can buy these mining stocks as one and therefore participate in the gold market with them and get dividends at the same time.

This doesn’t mean you should sell all the bonds and CD’s you have to buy mining stocks. And it doesn’t mean that you should get completely out of SPY if you are in it and move all of that money into gold.

But it does mean that talking heads who look at the market in a myopic way that claim that only bonds are a safe haven or that you can only buy the S&P 500 and stocks like AAPL are wrong to ignore gold and should start to view mining stocks as safe havens for their accounts now before they go up even more.

Now I don’t expect any of these TV people to actually do that, but I do believe that as gold and mining stocks continue to beat the market averages that the masses will trickle into them more and more. It will take time.

They did it with dope stocks and they will do it with mining stocks too.

The action in Aftermath Silver shows you how these stocks can start from a low level, double, and then consolidate to breakout again – a move that looks like it is just starting in w hat is my top stock pick for this month.

I talked about the stock market in more detail and what type of stocks to look to move next in an interview I did with Jim Goddard yesterday. To listen to it go here:

https://wallstreetwindow.com/2019/08/what-to-expect-next-for-gold-and-the-stock-market-mike-swanson-08-14-2019/

-Mike



Share This Post