Commodities are historically cheap
At this time, commodities like gold and silver are cheap. In fact, compared to the S&P 500, they have never been cheaper. The chart below shows the ratio of the S&P 500 to the S&P Commodity Index.
The chart covers the past 50 years, which means it includes crises such as the Gulf War in 1990 and the 2008 Financial Crisis. As you can see, commodities are dirt-cheap today. The chart also shows that each low point has been followed by an aggressive correction. To enable that, two things need to happen: First, the S&P 500 needs to go down, which it already has, and due to the historically high unemployment numbers coming—as we discussed in our previous article—the S&P 500 should continue to decline in the next few months. Second, commodities need to go up in price, which we are starting to see.
You can use this chart to make money. Here’s how:
First, go light on S&P 500 companies—and no leverage, please. Second, increase your cash holdings and diversify with physical assets.
Since buying physical grain, oil, or steel is not something you can do, two of the easiest resources to allocate to are physical gold and silver. My next article will be dedicated exclusively to silver. This one is about gold.
The gold bull market barely started
Like all markets, the gold market moves in cycles, including remarkable highs and then corrections. We are still waiting for the gold bull market to really take off. When looking at the real physical-metal market of bars and coins that responds to supply and demand in a predictable manner, the market is only up around 25% from its 10-year low. So, to see where we are in the cycle, let’s look at our second chart, comparing where we are now to the 4 large gold bull cycles in the past 100 years:
As you can see, the gold market far from qualifies as a bull market when compared to other gold cycles over the past 100 years—during each of the significant gold rallies in the past century, gold gained hundreds of %.
I’m convinced the gold rally is only just starting. If you can join it, you’ll see huge profits once it gets going.
Notes from the lockdown
Our company has now been working remotely for over three weeks. We have not let go of any employee, and they are all safe. I’m very happy to see that we’re able to provide the same level of service to our clients and provide anyone interested in protecting and growing their wealth with the information they need to assess if physical gold and silver are right for them.
It’s heartbreaking to see the daily toll of COVID-19 deaths in our country and worldwide. Thank you to everyone that is standing on the front lines of this pandemic by providing essential services while taking a personal health risk. From our vantage point, a special thank-you goes to our suppliers, especially the hardworking men and women at the Delaware Depository that send out shipments to our clients. Thank you, Dawn, Steve, and all your team members. We are grateful beyond words for your dedication.
May you all be healthy and safe.
Joseph Sherman, CEO