Sunday Info

From September 1 article

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• On the cusp of a golden bull run? It’s likely already begun, believes Goehring and Rozencwajg
• In an upcoming commodity bull market, gold could pull a 7X from its current position
• Morgan Stanley is a buyer of gold on the event of declining rates
• This week’s top ASX precious metals stocks

Our Gold Digger column wraps the news driving ASX stocks with exposure to precious metals.
First things first.
If you’d stuck your money into the goldies this week, then you’d likely be smiling as the XGD ASX All Ords Gold index is pointing 3.2% higher for the week, ahead of the Banks on 1.32% and Resources on 1.08%.
Good session, that. Nicely played. Same again next week, please. And now onto this article’s headline act…
Two sets of investment experts have made some head-turning comments about atomic number 79 this week. Let’s examine, and prize out the best nuggets, because there are some beauts.
Firstly we have Wall Street resources investors Goehring and Rozencwajg, who have just provided their thoughts on what they see as an “upcoming gold bull market” in a new report.
Their best quote is this little show-stopper:

Interestingly they clarify they are “no gold bugs”, which makes their thesis even more compelling, really. And that’s a thesis based on determining when gold is undervalued or overvalued.
“If an investor can identify periods when gold becomes extremely undervalued, it can offer exceptional excess returns, often uncorrelated with other financial assets,” they write.
Right now, according to Goehring and Rozencwajg, it’s very much undervalued considering what they believe is ahead.
Pointing to this chart (below) the Wall Street investors believe the size of the Fed’s balance is related to the dollar value of the Treasury’s gold holdings over the long term.

According to the chart, there have been two distinct periods over the past 100 years in which gold was highly overvalued and three periods during which gold was significantly undervalued.
That chart tells us… we’re looking at a peak bargain right about now.
“Gold, relative to the size of the Fed’s balance sheet, is more undervalued today than in the late 1960s or 1990s,” write Goehring and Rozencwajg.
“The reason: even though gold advanced over seven-fold over the last 23 years, the Federal Reserve’s balance sheet has grown even faster. Following the global financial crisis of 2008, global central banks have undertaken radical monetary policies.”
This is just one part of their thesis, but the upshot is they conclude that a commodity bull market has likely started, and that commodities, led by gold, are as undervalued as they have ever been compared with other financial assets.