The big market mover today (February 19, 2019) was gold, which has been on a nice uptrend for several weeks now. Today it was up over $22, briefly touching the $1344 mark for a move of 1.66%. For those of you who don’t watch gold at all, daily moves to the upside are typically considered big moves if greater than $6-$7, or about half a percent. Moves to the downside are big if they surpass $10.

Today’s move up by $22 is a pretty big move. Not only that, but gold hasn’t seen a price over $1340 in about 9 months. So what’s all the fuss that gold is up not just today, but really since it bottomed out at about $1200 last year at the end of September? The move is over 12% in just 4.5 months.

I think there are a few factors at play here that are driving the price of gold. One is that the stock market is not the best place to make money right now on your long positions. I’ve spoken and written about this at length so I won’t discuss that now. Suffice it to say that gold has always been a safe haven asset, and it is behaving as one now too, relative to stocks.

Also polishing the yellow metal is the bond market, and relative to bonds gold looks like a safe haven. The spread on 5-2 treasuries has remained inverted for months now, and the 10-2 is nearing an inversion at only 15 basis points. Bonds are not a safe place right now either, because remember that a flattening and inverting yield curve portends economic danger and possible inflation in the near term. It also makes it harder for banks to lend, and as I always say, access to capital is to the economy just as motor oil is to your car engine.

Another factor is that there has been a lot of merger and acquisition talk in the precious metals industry, particularly among the majors such as Barrick and Newmont. Consolidation in the industry marks a capitulation point, and while that shouldn’t affect the price of the metal itself, it bodes well for shares of the mining companies. And that doesn’t take into account companies like AngloGold Ashanti selling off my assets.

In this case, though, it actually bodes well for the yellow metal itself. Here’s why… billionaire Sam Zell, recently did an interview with Bloomberg, and he astutely noted that one of the biggest reasons he likes gold is because all the money in the sector is going into M&A, but almost nothing is going into exploration or building new mines. That should signal a decrease in supply forthcoming, which means that all else equal, the price should rise. But demand is beginning to rise as well, so it should be even better for gold.

Also adding some upward pressure is the news that not just Zell, but more hedge funds are going into long positions in gold, with the latest being Bernstein’s quant team and Pictet’s multi-asset team.

Other factors include the Fed’s dovish pivot, which is a pretty big factor, 24 mining deaths at a single mine in Zimbabwe, growing mining strikes in South Africa, all of which put heavy pressure on the price to rise. And let’s not forget trade talks with China. The longer the talks drag on, the worse it is for the economy on both sides of the Pacific. Also, Italy is now in recession and several other EU countries are also either in recession or on the brink.

All of this means near term as well as longer-term upward pressure on the price of gold, and while the price never goes up in a straight line, a long position in either the metal itself or in a mining fund should do well for the health of your assets. Just make sure to do a little research before investing in a fund, because they aren't all created equal. Personally, I'd avoid the likes of GLD, IAU  SLV, and the mining index funds, because you just won't get the same return as some of the others which are better vetted and therefore better positioned for the upswing in PM. I'd also much rather directly buy the metal and then hand it over to one company in particular who can give you a return paid in additional ounces.

 Until next time remember there’s always a bull market somewhere in the world, and on the opposite side of every crisis lies opportunity.