The mantra of higher inflation and expectations for it to be here to stay could take the next two or three decades to develop. That’s shifting the investment outlook, supporting a commodity supercycle that will likely be led by precious and industrial metals. Buy the Sprott Physical Silver Trust (PSLV), says Omar Ayales, editor of Gold Charts R Us.
The set up couldn’t be more bullish for gold. Gold has been in very similar circumstances only two other times in its recent 50-year history. That was during the periods of 1970 through 1981 and 2001 through 2012. Both bull markets took 11 years to develop and experienced two major lows – the first one at the start of the 11-year cycle and the second one about 8-9 years into the cycle.
Interestingly, during both bull markets, gold turned parabolic after the second low within the cycle. The up move after the second low took about three years to develop, delivering unbelievable returns.
The current cycle began in December 2015. Back then, the Fed started its rate hike cycle for the first time in nearly 10 years. Since then, gold has been rising steadily with strength. The setup got better back in 2019 when gold was classified as a Tier 1 asset by the Bank for International Settlements. And it took off when the US tried weaponizing the dollar against Russia during the Russian-Ukrainian war.
The two events were key as they opened the flood gates for central bankers to increase gold holdings and reduce exposure to other traditional safe havens, such as sovereign bonds, especially US Treasuries. It is no coincidence central bankers have been buying at a record pace over the past two to three years.
Consider that gold’s second bottom during its current 11-year cycle occurred in 2022. Since then, gold has been rising, picking up the pace during the past year. Moreover, 2025 is approaching the end of gold’s 11-year cycle, which tends to be its most explosive. This means gold could turn parabolic over the next 12 months.
This time last year, my conservative recommendation was the Sprott Physical Gold Trust (PHYS), an ETF that tracks the price of gold. The price of gold (and its ETF) delivered returns of around 30% in 2024. Although a continued investment in gold would be a strong conservative bet this year, I’m opting for the PSLV instead.
Remember that silver tends to outperform gold during bull markets. And it has not done so thus far. However, that is about to change as gold goes into the final scene of its 11-year show. The risk of being OUT of this last phase of gold’s bull market is higher than the risk of a loss.
