Yes, precious metals are actually in a bull market. If you actually polled the mainstream, you would find few that could even admit it. Its almost heresy if you come from a conventional background. As we now know, conventional thinking often fails miserably. Gold (NYSE:GLD) is in the 11th year of its bull market and conventional thinking continues to ignore the obvious.
First, its important to note the current juncture. Gold (NYSE:GLD) and Silver (NYSE:SLV), more or less are basically at all-time highs. Silver (NYSE:SLV) is if you exclude the final spike and look at the monthly closing high of $35. Meanwhile, the large cap gold stocks as shown by the Barrons Gold Mining Index below, recently broke to a new all-time high. Sure large caps have struggled but they reside in major breakout territory.
Give or take 5% we are basically at or near all time highs. Yet, the masses continue to allocate capital elsewhere. Here is one example. Here is a look at the assets in the Rydex Precious Metals Fund (source: SentimenTrader.com):
Note that the assets are currently ~$199 Million. Several months ago the assets were almost at $350 Million. The peak was at the end of 2009 at $375 Million. This is just one measurement of fund flows but it shows a significant outflow in the last few months, yet the sector is basically at an all time high.
Also, global pension assets are estimated to be $31.1 Trillion. Shayne McGuire, author the book Hard Money; Taking Gold to a Higher Investment Level, estimates that the typical pension fund holds only 0.15% of its assets in gold and another 0.15% in mining stocks.
Needless to say, this is a potentially extremely explosive situation. As this bull market continues, at somepoint the massive herd will gradually pile in. Better to get in ahead of the herd rather than follow it.
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