Tesla Flashes Red and Gold Marches Through a Big Test
30 July 2020
Read Time 2 MIN
In recent weeks, several events stood out to us, and I wanted to highlight them here.
First, gold passed the first of two technical tests that will signal how powerful this gold bull market will be.
Gold is rising because of the gasoline the Federal Reserve (Fed) is throwing on the flames of our economy. It started with the reversal in January 2019, when the Fed started cutting interest rates instead of raising them. Gold’s breakout from its trading range happened in the summer of 2019, when our outlook became bullish on gold. Put another way, the Fed has lowered real interest rates, which is gold-bullish. (By contrast, I’ll note that China is recovering and its interest rates are actually rising.)
But we’ve said that investors should care whether price action (“technicals”) are confirming this fundamental view.
Test one was: Would gold break through the “resistance” of $1,800 per ounce, which held it back in 2011?
Lo and behold, gold rallied past $1,800 in early July. And the steadiness of the rise through $1,800 is a major bullish sign that suggests that this gold bull market could last for years. The second test was whether gold can make all-time highs, which it has done in recent days, surpassing the previous high of around $1,920 reached in September 2011. Learn more in our updated Investment Case for Gold.
Growth Froth is Worrying
Since mid-April, our view has been that investors should be comfortable maintaining their strategic allocations to stocks and bonds because of stimulative government policies. It is understandable that growth has outperformed value for years and through the COVID-19 crisis, but I wonder if that outperformance will continue.
It is worth noting that the Morningstar Wide Moat Focus Index, using proprietary valuation methodology, moved further to a value weighting in its end of June rebalance.
| Date | Value | Core | Growth |
| 6/30/2020 | 50.7 | 30.3 | 19.0 |
Source: Morningstar
Related Insights
IMPORTANT DEFINITIONS & DISCLOSURES
This material may only be used outside of the United States.
This is not an offer to buy or sell, or a recommendation of any offer to buy or sell any of the securities mentioned herein. Fund holdings will vary. For a complete list of holdings in VanEck Mutual Funds and VanEck ETFs, please visit our website at www.vaneck.com.
The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from Van Eck Associates Corporation or its subsidiaries to participate in any transactions in any companies mentioned herein. This content is published in the United States. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed herein.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
