- The ratio of federal debt to the GDP is expected to rise dramatically due to the covid-19 pandemic fiscal stimulus. This should result in a significant gold price rally.
- The analysis shows that a trading strategy for gold miners is preferable to a buy-and-hold investment strategy of individual mining stocks.
- This momentum strategy selects periodically one gold mining stock from a set of three: AngloGold Ashanti Ltd (AU), Newmont Corp. (NEM) and Sibanye-Stillwater Ltd. (SBSW).
- The selection is based on the momentum of the percentage price change and the up/down volume ratio of the stocks.
- From Jan-2016 to Apr-2019 this strategy would have produced an annualized return (CAGR) of 80.6%, much more than that of the best performing single stock of the three considered.
The ratio of federal debt to the economic output of the U.S. is expected to rise dramatically by the end of 2020 as a result of the covid-19 pandemic fiscal stimulus. This, and low interest rates should result in a significant rally in gold, similar to the post 2008 gold price increase, as shown in the figure below.
