Last year on 16th October, I noted that another factor that confirmed global equity markets were in the late stages of its bull market was the changing tide in gold. After being a serious gold bear for several years, the lack of further downside in the metal in the same way it had fallen in prior years suggested that the trend was potentially shifting.
Naturally as other asset classes appreciated strongly due to unprecedented stimulus from global central banks (real estate, equities, bonds and the best performing asset class – classic cars), gold had zero appeal. But as equities stalled late last year and gold’s decline did likewise, it was time to reassess.
My conclusion was to no longer be bearish, use dips as buying opportunities instead of shorting rallies and finally it was another sign to be selling equities. Gold now has begun to surpass some serious longer-term resistance that points to a stronger outlook globally for precious metals as a whole and producers themselves. Below it can be seen that the big long-term downtrend from the highs has been breached and was done in spectacular fashion last night reaching over US$1260/ounce. The Relative Strength Indicator (RSI) has also broken its multi-year trendline that stretches back to the highs of 2011 confirming the breakout and new uptrend.
While last night’s move is likely to be a short-term high point, it only confirms that dips from here need to be bought as a new longer-term period of gold appreciation is upon us. Why? Because central bank and Government policy of the last 8 years is now crippling the global economy and China is teetering on the cusp of its own financial crisis. We know this move in gold is not just a short-term flutter.
Another area of the market I watch closely for signs of market peaks is the classic and exotic car market. For those that unaware the classic car market has been the best performing asset class since 2009, exceeding the gains in the S&P 500, real estate prices and certainly above art and fine wine which have seen flat to negative returns. The average returns have been near 20% for seven consecutive years depending on which marque is in question.
Prices began to soften at the end of 2015 and at the very first major auction of 2016, at Scottsdale Arizona, prices actually fell for the first time since 2010. Moreover, prices were soft across the board from US muscle cars (popular with the oil drillers and miners) while the more stratospheric marques of Ferrari, Lamborghini and Porsche were generally soft or failed to sell. A sign of a rampant market that is exhausted. Buyers are now becoming more discerning with their cash and that has been reflected in 2016 in equity markets as well.
This morning I received the January price results for the variety of classic car indices from HAGI that confirmed what I had seen in the auction results. HAGI Top represents a combination of the most valuable exotic and classic cars. HAGI P is Porsche, F is naturally Ferrari and ex P and F are for cars outside the Porsche and Ferarri brands. Finally the MBCI index is Mercedes Benz. Prices are indeed on the decline and like art in previous cycles falling before or in conjunction with equities, its occurring in classic cars for this cycle.
