A lot of people had high hopes for gold…
After all, the COVID-19 pandemic felt like it was ripping the world apart in early 2020.
Governments took extreme actions to fight the virus. And central banks around the world slammed interest rates effectively to zero as the global economy shut down.
For a moment… it looked like gold would rule this era.
The precious metal’s value had already climbed around 29% off a significant low in 2018. And then, as the pandemic started in early 2020, things really heated up…
Gold began that year at about $1,525 per ounce. By that August, its value had exploded to an all-time high of around $2,075 per ounce.
That’s a roughly 36% move in about eight months. It’s comparable to the massive surge in tech stocks so far this year.
It seemed certain that gold would keep soaring from there…
The so-called “money supply” surged as the government pumped cash into the economy. And it’s generally accepted that gold protects against the falling value of the U.S. dollar.
But then, something strange happened…
Gold traded sideways for nearly three years.
Now, the Power Gauge is weary about the precious metal’s future. Our system just released a warning on gold – or more specifically, gold miners.
Let’s take a closer look today…
There’s no question about it…
The price of gold has defied many investors’ expectations since the start of the pandemic. It’s easy to see the precious metal’s “rangebound” behavior on the chart. Take a look…
Sideways with a dash of volatility. That about sums it up.
Now, we could play armchair economist trying to explain why this is happening. But the reality is that academics will be writing papers on the current era’s gold prices for years.
Instead of waiting on those papers, we can turn to the Power Gauge today…
Now, the Power Gauge doesn’t directly rate the price of gold.
That’s because its 20 factors cover technical-focused price movement and fundamentals. And we all know that gold doesn’t have price-to-earnings or earnings-per-share measures.
With that said, the Power Gauge does rate many of the world’s top gold miners – like Newmont (NEM) and Barrick Gold (GOLD). And it even produces a grade for the VanEck Gold Miners Fund (GDX).
That means we can use the Power Gauge to get a “one click” look at the state of gold – and the businesses that depend on it. It’s a way for us to quickly check the pulse of this space.
Unfortunately for gold bugs, the picture is grim right now…
The Power Gauge just turned “bearish” on GDX last week.
Worse still, GDX is significantly underperforming the broad market so far this year. And the so-called “smart money” has started exiting the trade in recent weeks as well.
It’s not surprising…
Of the 36 stocks the Power Gauge rates within GDX, only two earn “bullish” or better ratings today. And 15 stocks receive “bearish” or worse ratings.
Put simply, gold miners look like a losing bet these days. And the Power Gauge is warning us about continued underperformance in the coming weeks and months.
So if you’ve overallocated to gold, now is the time to look elsewhere.
We’ve endured three years of sideways price action in this corner of the market. And even worse, the Power Gauge just turned “bearish” on the companies most connected to it.
Consider yourself warned.
Good investing,
Marc Chaikin
