Why Gold Prices Will Fly Ahead of the Election – And Double to $5,000 After
By November, here's where GLD prices could be ...
Editor’s Note: Today I’m featuring an interview with Chris (C.J.) Johnson, a longtime industry colleague and a frequent collaborator back in the past.
WPIII: C.J.’s bullish views on gold hit my radar a few weeks back. He says that gold — which is trading at about $2,380 right now — could zoom to $5,000. That’s right … a double.
And with the ongoing worries about general prices (food, energy, rent, insurance) that are up by an average of a third from pre-pandemic levels, geopolitical fears about the Middle East, the Russia/Ukraine War and the looming U.S. presidential election, and questions about what the U.S. Federal Reserve will do next (and when) … Chris’ insights are more relevant than ever …
So I invited him to talk to our friends here at Stock Picker’s Corner … to talk about his gold prediction, the intriguing catalysts behind it and the time frame he’s looking at.
Best of all: He’s going to detail the best ways to play it. Call it a “special situation.”
So, welcome Chris … glad you could join us.
CJ: Happy to be here, Bill. Appreciate the invite. Nice to see and talk with you again.
WPIII: Before we get started here, maybe you could give our readers a bit of a background on your career and achievements. I know people are showing up to Money Morning to hear from you each day … and you’re the face of the company’s fast-growing YouTube channel.
You’ve done quite a lot during your career … maybe just give our folks a rundown on your achievements?
CJ: Absolutely … I started as a budding young broker at Prudential Securities. That was back when I was still at Ohio State. During my junior year, I worked for my mentor – and worked the phones …
WPIII: Ah, yes … the old “smile-and-dial” days of cold-calling.
[Laughter]
CJ: [Nodding] But, you know, that also introduced me to options. I even remember my first trade … on Intel Corp. INTC 0.00%↑ … it was ’93 or ’94 and I was all of 19. I had to call it in to the trade desk … which tells you how long ago that was.
After graduation, I went to work with the regional bank in Cincinnati which is now U.S. Bancorp USB 0.00%↑.
I worked with the trust department there. I got into portfolio management and research … working in the back office … and getting a terrific foundation analyzing the markets and stocks.
Now in 1998, I got the opportunity to work with Bernie Schaeffer at Schaeffer's Investment Research.
WPIII: A well-known firm … and a big deal for you, as I know from our years of working together.
CJ: [Nodding] A very big deal. It was there that I really got deep into the options market and applied my research.
You always talk, Bill, about your “Know Thyself” investing philosophy. I come from an engineering background, so I always had that analytical and quantitative “bent” or focus, if you know what I mean.
WPIII: I do … yes, indeedy.
CJ: Well, “knowing myself” … this is where I really started having fun … because … I believe … if you know the market, the options market is so much more data-rich than the stock market. It’s where all the speculation happens, and markets are driven by speculation; not fundamentals.
I pretty much “earned my wings” there in terms of data analysis. I invested … probably … four good years in a project … an SQL database that helped me build a website that became recognized as “Barron’s Best for Trading” back in 2004.
I'm really proud of that – and it’s amazing to think how that single project got me into the “Big Data” side of analysis.
WPIII: It’s interesting … successful folks all have those “seminal moments” that shape careers … mine was the Contrarian Investing book and my time covering Kodak on the national business beat. So I can relate to your achievement here … which I know was very big … and we reaped the benefits of your work at Money Morning.
So let’s “teleport” forward a bit.
CJ: [Nodding] Absolutely, Bill. Move forward another 10 years and I started my own company, Johnson Research Group.
I started to work with Money Morning shortly after. As you know … that’s when it really took off for me. I developed four successful research-driven services … and got to do a lot of writing … creating content that showed folks what we were doing … demonstrating how the markets worked … built a nice following.
As a bonus, I find that I’m a better trader when I’m writing.
WPIII: I get that. I’m a better investor when I’m writing. The process forces you to “find the story” … and “make your investment case” to an outside audience. You can’t cut corners … can’t “rationalize.”
CJ: I’m certainly doing that now. As you said earlier … I'm the Chief Editor for Money Morning, writing three to four times a day on the markets … as well as producing videos for our YouTube channel.
You ask me to categorize my style. I am definitely well-learned and deeply rooted in technical analysis. That goes back to my quantitative nature.
I also use aspects of fundamental analysis with a heavy dose of quantified sentiment.
When you put the three together, I call it Behavioral Valuation.
It's a contrarian take on sentiment, which isn’t news, but it also accounts for technicals and fundamentals to confirm that it's OK to take the contrarian side.
Let me give you just a quick example of what I consider a tradable situation.
I'm looking for companies that are fundamentally strong and technically strong but that market sentiment tells me there's a lot of pessimism toward the stock.
This is what allows me to be early on a stock or an index’s trend.
We find that fear and greed drive markets. I like to get in before that greed really starts to take hold because, well, if you're there before the greed trade, you're going to beat the market every time.
And the reverse is true, too. I like to get out before the fear starts to take over. That's my style.
WPIII: It’s fair to say that you’re more of a trader … but you also look for true “investments,” too? Putting time on your side is something I preach to do here at Stock Picker’s Corner. But I do also talk about “Special Situations” – opportunities that play out over a shorter time horizon.
CJ: Oh, absolutely, Bill. That's a great way to put it. I find that my trading outlook in terms of a time frame is four to six weeks. That's my sweet spot. If you really want to know the specific number – because I've analyzed it – it's 24 days.
But four to six weeks is how far out I’m looking on a short-term basis. And then six to 12 months on my longer-term basis … when I'm looking to buy and hold stocks – or gold.
WPIII: Gold … I’m glad you mentioned that.
[Bill and Chris erupting in laughter]
Sorry … I couldn’t resist.
Okay … let’s talk gold … because it sounds like you’ve got kind of an intermediate-term scenario sketched out here.
But if I “read between the lines,” it sounds like there are some more-structural trends or catalysts in place that favor gold in some longer-run scenarios, too?
CJ: Right, Bill. If you look at gold from a historical perspective, I view it as more of a trading vehicle than an investment. And I know that goes against how people feel right now about gold, but historically, over the last 20 years, you really didn't want to just buy it and tuck it away in a safe. You would have done much better buying a low-volatility version of the S&P 500 or a small group of blue-chip stocks.
WPIII: I hear a “but” or “however” coming …
CJ: How about a “that being said?”
WPIII: That works, too …
CJ: That being said … I look at gold right now … and see a period where the next one to two years are very likely to favor the bulls with a continued uptrend … and I see increased volatility to the upside – which tells me that the traders are very active in the gold market. I like that: It adds another catalyst – or as you say, Bill, a “trigger” – to the price of gold.
And that “trigger” … is greed.
WPIII: I like that, Chris.
Let’s talk predictions.
And let’s start with your near-term prediction … what’s your target price? What’s the time frame? And what are the catalysts?
CJ: Okay, Bill. We’re going to do something a little unique here.
Here are my near-term and intermediate-term “predictions” and “investment cases” for what I’ve been referring to as a “GOLD RUSH” …
WPIII: … Or rush to gold …
CJ: Good one [shakes his head] … the years pass and the seasons change … but that trademark Patalon sense of humor never fades away …
[Bill and Chris both laughing.]
But all kidding aside … that’s a shrewd comment, Bill. And … you’re right … we ARE seeing a rush into gold. And we’re seeing it show up in the SPDR Gold Trust (GLD) – an ETF backed by physical gold that’s both a “proxy” or “stand-in” for the “yellow metal” … and the easiest, most-liquid way to trade or invest in it.
And as I’ll show you in a minute, GLD is the main way I’m going to play this …
WPIII: This is great stuff, Chris.
And great timing …
I mean, we’re seeing a price surge in raw materials that’s essentially across the board in scope.
I’m talking about raw materials that are the “key ingredients” for manufactured products … transportation … high tech.
The S&P GSCI – an index of global commodities prices – is almost neck-and-neck (a 9.2% return this year) with the S&P 500’s 9.38% surge.
Here at Stock Picker’s Corner, we’ve given folks some deep-dive reports on silver and copper … the metals and the stocks that profit from them. It’s interesting … the response – I’m talking about the interest we’ve seen in those reports – has been kinda stunning.
And gold is part of that “bullish commodities club.”
Gold – the metal itself – set a new record high of $2,431.55 back in April. It’s backed off a bit since then – was above the $2,300 mark today – but it’s still up 11.73% this year … versus that aforementioned 9.38% gain for the S&P 500.
WPIII: So what’s going on here, Chris? Let’s talk “Gold 101.”
CJ: Absolutely. Say the word “gold” to most investors, they’ll tell you it’s a precious metal, a store of value and a hedge against uncertainty.
But it’s also a valuable industrial metal … just like silver, which I also like a lot … as I know you do, Bill.
WPIII: [Nods in agreement] So true. Like I said … we did a very substantive special report on silver here at Stock Picker’s Corner.
CJ: So … looking at gold … we’re essentially moving into a stretch where all the catalysts that are positive for gold prices are in play all at once.
You’ve got the uncertainty of inflation and geopolitical tensions.
And you’ve also got a strong economy.
WPIII: Which is good for industrial demand.
CJ: Exactly.
Gold is important for medical devices, electronics, automotive applications, and defense technology.
All of these increase the demand for gold. And as my analysis shows, this is bullish for gold prices.
WPIII: Show us what you mean …
CJ: You bet.
If you look at the chart here, you’ll see that I’ve included an additional indicator – one you’re probably not used to seeing. The pink bands are the Bollinger Bands for GLD. They indicate when a stock has started a volatility rally or selloff.
In this case, it’s a rally.
Let’s break the chart down.
The 50-day moving average for GLD turned bullish in early March as it started to trend higher.
Historically, this means that GLD shares have a 67% chance of closing higher each trading day.
Read that again … because it’s a pretty cool stat.
Similarly, the 200-day moving average for GLD is bullish. This tells us that momentum for the next four to six months favors the bulls.
WPIII: Wow. Do I ever dig that …
Six months … gee … let’s see there, Chris … that runs us out to October … and drops us on the doorstep of a pretty important event here in America ….
CJ: [Nodding] … yes …. the U.S. Presidential Election.
And before we get into that – what you like to refer to as my “investment case”– let’s set the table by talking price targets and time frames for GLD.
WPIII: Let’s do that …
And … just for a point of reference … so that folks don’t have to look … I’m just noting that GLD is right about $214 as we talk here.
So, Chris, what do you see?
CJ: First, the Four-to-Six-Week Outlook: So, looking at where the GLD shares are right now, we just had about a 6% pullback, almost to $210 after GLD rallied above $220.
I see this as a healthy correction.
We've seen a couple of them a little bit in March, but that pullback didn't quite touch the 50-day moving average that is right now telling you that the trend is extremely friendly for gold.
But as we get into a little more uncertainty about what's going on in the Middle East and obviously with the approaching Presidential Election, I think we take out that $220 and trigger a huge volatility rally; that is where you see GLD rocket up to $235.
Ultimately, we continue to go higher.
Then …
The Three-Month-to-Six-Month Outlook: I said gold is usually a short-term trade, not a long-term hold. From 2020 until about three months ago, GLD stayed in a range. The range was from $195 down to $155. We just broke out of that range last month and triggered a long-term volatility rally.
That long-term volatility rally will carry GLD to my target of $250, and I think that happens right before the election.
WPIII: Okay … so $214 to $250 … before November … or about 17% in, what, five months? And maybe MORE after … when gold could make that run to $5,000? Not a bad “special-situation” opportunity.
While we’re on the subject … because I’ve got you here … (and because I’m interested … are you talking JUST GLD … or potentially EVERYTHING?
CJ: A great question.
I think it happens in several of the “risk-off” assets. Think about gold, silver, or anything that people like to have to store value.
WPIII: Fascinating. There does seem to be a bullish investment case for gold – even past this summer rally and “election walk up” you’re talking about.
In a research note I saw a few weeks back, the commodities-strategy group at Macquarie Group said commodity prices are likely to go higher still, thanks to accelerating income, rising global goods demand … and strong economies in the U.S. and China.
CJ: Those are the key points … yes.
WPIII: Now … in a workup you and I did in advance of this interview, you assembled a pretty cool list of five catalysts that really frame out the bullish prospects for an array of commodities … including silver … and especially gold. I really like these … they’re clever … pithy … and I think will resonate with our readers.
So give me a rundown …
CJ: Thanks, Bill … yeah, I like these a lot. And as you said … there are five … I even “named” each one for clarity.
Gold Catalyst No. 1: Economic Muscle: In just the last few weeks or so, new reports show that the factory sectors in both the United States AND China are accelerating their rebounds. Real incomes are rising, too. So companies and consumers are buying, and energy and materials stocks are rising. And with summer driving season approaching, demand for gas and oil will get another boost. As you said, Macquarie says commodities prices could keep surging for a good bit. And that includes gold.
Gold Catalyst No. 2: Central Banks/Central Hoarders: The world’s central banks have been hoarding gold for more than two years – and they’re still banking the yellow metal. According to the World Gold Council, central bank gold reserves swelled by more than 1,000 metric tons for the second straight year last year – with the People’s Bank of China and the National Bank of Poland adding the most. Purchases have carried over into 2024. China’s central bank purchased gold for its reserves for a 17th straight month in March. Central banks buy gold to hedge against inflation, a falling dollar – and to promote stability in their own country.
Gold Catalyst No. 3: Where Oh Where Are My Interest-Rate Cuts? Oddsmakers keep reducing the number of expected central bank cuts … and push them farther and farther down the road. As a general rule, rate cuts weaken the dollar. And that boosts demand for (and prices of) gold since folks buy it as a “hedge” (precisely the scenario I just outlined with the central banks). Since we know rates will come down at some point, one of the best intermediate-term bets (besides stocks) is gold.
Gold Catalyst No. 4: The Buck Stops Here (Or Somewhere): The U.S. dollar is still the world’s top reserve currency, though we’re seeing a slow shift away from the greenback. Russia and Iran recently said they were ditching the greenback – cutting into the U.S. standing as the world currency. Hedge Fund Pioneer Ray Dalio’s last book, Principles for Dealing with the Changing World Order, details the rise and fall of the world’s superpower economies. It’s a great read and details one of the reasons that central banks are buying gold and the likelihood that the dollar’s decline has much further to go.
Gold Catalyst No. 5: Gold Will Hedge Your Bets (No, Really): If the economic strength we’re seeing continues, the commodity surge will continue, as well. In a world where prices remain 30% or more above their pre-pandemic levels, the potential for a new leg of inflation remains high. And that will be bullish for gold. Conversely, with the unpleasant geopolitical backdrop and an election approaching, a stumble toward recession will send folks looking for safety and stability – burnishing gold’s sanctuary status. Gold may not LOVE recessions … but it certainly likes them.
WPIII: Man … I love your “investment case.” Thanks for joining us here, Chris.
CJ: Happy to talk, Bill. Hope we can do this again very soon.
P.S. As a reminder if you want to follow along with C.J.’s work, you can do so at Money Morning and on YouTube.
So bullish on gold but for different reason.
After the halving $BTC mining cost is around $80k now.
Given that miners won’t sell bulk of what they mine until $80k.
Meaning we will see $80k at some point amd there is no way gold will stay same as BTC skyrockets because BTC derives its value from perception of digital gold.