Stock Market Correction Incoming. Time to Buy Gold?

Are stocks running on fumes?

That’s a question savvy investors are asking themselves… and for good reason.

 For much of this year, stocks have been on fire. 

The tech heavy, Nasdaq 100 is up 40% in 2023… and coming off its strongest first half to a year ever.

But nothing goes up forever… including stocks. Eventually, gravity sets in.

We bring this up because we’re starting to see the first real signs of exhaustion in months.

Take a look at Apple (AAPL).

The $3 trillion behemoth has been grinding higher all year. But it ran into trouble last week after reporting weak earnings.

The stock sliced through the uptrend that it’s been in since March like a hot knife through a stick of butter. It also pierced its rising 50-day moving average.

This is a major red flag. Apple is the biggest, most important stock in the entire market.

If it starts to crash, the indices will absolutely feel it.

Of course, that doesn’t mean we still can’t make money in this environment.

One area of the market that we love right now - both as speculators and long-term investors - is gold.

Today, we’ll explain why gold is a “no brainer” investment for any serious investor. We’ll share both the technical and fundamental arguments for owning gold. We’ll also tell you about the investors with unlimited money who are buying gold hand over fist.

But we want to first welcome you to The Discount. Each week, we dive head first into the biggest issues facing traders and investors… and explain how they impact your portfolios.

Today we’re doing a deep dive on gold. But let us first explain why we’re looking at the yellow metal in the first place.

The chart below shows the performance of the Invesco DB Commodity Index (DBC), which invests in a basket of commodities.

 DBC had been in a downtrend since last June… until breaking out of that falling wedge pattern a few weeks ago.

This alone is bullish for commodities. But it’s hardly the only reason we’re bullish on the asset class.

Here’s another chart. This one compares the performance of DBC with the S&P 500.

When this ratio is rising, it means commodities are outperforming stocks. When it's falling, it means the opposite. Stocks are outperforming.

Notice how this ratio bounced strongly after pulling back into the key support level. That’s bullish. In fact, we believe this could mark an important bottom for this ratio.

In other words, commodities could start outperforming stocks in a major way in the back half of 2023.

So, consider taking some chips out of the stock market and rotating that money into commodities.

Of course, there are tons of different ways to cash in commodities. You could buy oil stocks or swing trade commodities. We’ve taken advantage of this and had several winning trades already in our free Telegram Channel.

But that’s not the focus of this issue. We instead want to lay out the case for owning gold for the long run.

Let’s start with the technicals.

This chart shows the performance of gold over the past couple decades.

We can see that gold is forming a massive “cup and handle” pattern.

The “cup” portion of this pattern was built out between 2013 and 2020. The “handle”, or the smaller base, has been built out over the past three years.

Long-term basing patterns like this are as bullish as it gets.

When gold inevitably does break out of this, it should enter a new gold bull market…one that could last many years.

Having said that, we’re not just bullish on gold because of what we’re seeing on the charts.

The fundamental case for owning gold has never been stronger. The chart below says it all.

We’re looking at the explosive increase in the national debt over the past century or so.

It’s gone parabolic. This, of course, happened because the U.S. government has gone on a drunken spending binge.

To accommodate this borrowing binge, the Federal Reserve has printed money like crazy.

Just Covid, the total amount of dollars in circulation has increased 40%. You read that right. About 40% of all dollars ever created didn’t exist

If you have a basic understanding of economics, this shivers down your spine. It’s incredibly inflationary. It’s why everything from rent to everyday groceries has skyrocketed in price over the past few years.

Sadly, this trend is only going to accelerate.

Take a look at this chart. This one includes projections from the Congressional Budget Office (CBO).

We can see that the total U.S. public debt outstanding is projected to rise from about $35 more than $50 trillion by 2033.

These charts show why we believe everyone should own some gold. Think of it as insurance for when the next big financial crisis hurricane makes landfall.

But don’t take our word for it. The central banks themselves have also been buying up gold like crazy.

You can see what we mean below. This chart shows how many tonnes of gold central banks have acquired every year going back to 2000.

Prior to the 2008 global financial crisis, central bankers were net sellers of gold. But they started aggressively ramping up purchases around 2011.

Last year, we saw record levels of gold buying from central bankers. They couldn’t get enough of it!

So far in 2023, that trend has carried over. During the first half of the year, central bank demand for gold hit a record high.

That is quite ironic. After all, central bankers have dismissed gold as a “barbarous relic” for decades.

But I guess they would understand the value of gold more than just about anyone. After all, they are ones who planted the seeds for the coming monetary crisis.

Nonetheless, these are not investors we want to bet against. Central banks, unlike anyone else, have unlimited money. They can create more currency units with a few keystrokes.

We will be launching The Discount Portfolio soon. Here you can track all of our long term, mid-term, and short-term trades in real-time, with common-sense analysis for each position we take.

Until The Discount Portfolio launches, we update everyone in our Telegram Channel on trades we are taking, currently in, and keeping our eye on.

A service that anyone, from beginner-to-advanced, can easily understand and take advantage of.

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For now, stay tuned and have a great rest of your weekend.

See You Next Sunday!