-- Posted Monday, 4 February 2013 | | Disqus

Will the real rotation in the US financial markets be a move into gold and energy stocks this year rather than a big shift out of bonds and into the stock market?

It’s an intriguing prospect raised by Wall Street newsletter writer Mike Swanson. He thinks US equities are not far off reaching a top for the year and thereafter a sidewards drift in a narrow trading range is all this market has to offer.

Mr. Swanson recalls three periods in the 2003-7 bull market when stocks behaved like this but gold and energy stocks did very well. Holders of junior gold stocks in particular may remember this as a period of fantastic gains that have been cruelly dashed since the crash of 2008.

New bull phase?

Gold and silver topped out in October and April respectively in 2011 and gold producers’ stocks have underperformed since then (see chart below). Mr. Swanson maintains the GDX gold ETF chart is about to breakout from around 40 within a few weeks.

That could be the moment to load up on gold and energy stocks if his theory is correct. Mr. Swanson was certainly one of the few commentators to spot the bottom in European stock markets last year and his call on Greece was particularly timely last summer.

What we like about his proposition is that it fits with the lacklustre global economy we see around us in 2013 which is underpinned by the central banks but without any impetus to get it to a higher level. However, $85 billion-a-month of Fed money printing really ought to be doing something for gold and silver prices and their related equities.

Making sense?

Perhaps this is it. In that case ArabianMoney would be wrong to predict a big stock market crash coming in the near future. Markets are entering a more boring phase that perhaps leads on to a true recovery, albeit nothing very dramatic.

However, inflation will still gradually creep up behind us as the central banks continue to print more and more electronic cash, and that will appear as a shock at some point in the near future. That would then crash bonds and equities as we have previously forecast and push money into the narrow gold and silver markets.

Gold and energy equities would be the standout winners as in the late 1970s’ stockmarkets, with junior gold explorers top of the list of winners.

-- Posted Monday, 4 February 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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