Commodities tend to have very long cycles. It can take years for rallies and declines to play out.
These rallies tend to play out in phases. In the first phase of a rally, the commodity typically is coming off a big decline from a prior peak. There’s a lot of skepticism in the market that it can go higher—and that skepticism created a bargain in the first place.
Once there’s a meaningful move higher, and as long as the fundamentals are in place for prices to continue rallying, however, sentiment starts to shift. The prior rally has attracted more buyers. Interest rises. Headlines go from skeptical to outright bullish.
We’re seeing this next phase start to play out with gold right now. The metal went down from its last peak in 2011 until 2016—a five-year bear market! But in early 2016, the metal started to gradually move higher.
It wasn’t a move in a straight line. It had a lot of pullbacks along the way. But each time it pulled back, it made a higher low than the last time—a healthy sign of an early stage bull market.
Today, with gold now up about 33 percent off its lows, it’s starting to attract investor interest. This is the next phase of the rally, where the price move higher tends to speed up.
In that kind of environment, investors may want to look at gold mining companies. While gold prices are up over the last three years, the move has been so slow that many mining companies have continued to struggle. But as prices rise, mining companies will start to see profits roll in faster.
Gold is moving higher— it’s time to take a closer look at the space and the opportunities there.
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