Forecast came true

gold is a better bet than oil
20 february 2015

I've been saying for a while now that I don't see any reason to try to game a bottom, or any type of trade for that matter, in oil/energy.

We've made a lot of money and avoided a lot of heartache over the years sticking with our strategies. Unless oil drops to like, say, $20 a barrel and there's a wave of bankruptcies in the sector where we could go in and buy the survivors, I'm just not interested in playing energy/oil. Oil CLH5, +0.10% is down 33% in the last three months. I doubt that it'll be down 33% from here when we look back in three more months' time, but I don't know that we'll see the $75 level from just 90 days ago for many years to come.

Even if and when the bankruptcies come, I'm not going to be looking to rush into energy stocks as I'd outlined in, “Don't buy energy stocks until the bankruptcies start.”

I wouldn't say that a major oil company going bankrupt would be "the catalyst" for a permanent uptick in oil prices and/or a great entry point for investing in oil/energy stocks. I do think there will be bankruptcies in the energy sector before it bottoms. I simply want people to understand that oil/energy/commodity cycles can take years or decades to play out and that bankruptcies are part of being in business, especially in cyclical commoditized industries.

On the other hand, let's look at the setup for gold GCJ5, -0.07% over the next few years. The fundamentals all point to higher gold prices in coming years as the 0% interest rates, QE, and all the other games the Fed and the Republican-Democrat regime have played with our money. That said, for the near-term, the dollar being the go-to safe currency — in a world where every major country is trying to devalue their citizen's money — could keep a lid on the price of gold.

Compound all those economic tailwinds for gold with the fact that the miners aren't producing much gold these days at these prices while oil supply continues to come on line even at these lower prices and you've basically got the exact opposite setup for gold that you do for oil.

I built up the bulk of my gold position a few years ago and am holding it steady for now. I might add another tranche to my own gold if it were to get down closer to $1,100 or lower as I've been saying for the past year or so.

I'd sure rather own gold than oil over the next five years.

DISCLOSURE: At the time of publication, Cody Willard was net long physical gold coins and bullion.

Answered:
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gold is a better bet than oil

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Forecast came true

I built up the bulk of my gold position a few years ago and am holding it steady for now. I might add another tranche to my own gold if it were to get down closer to $1,100 or lower as I've been saying for the past year or so. I'd sure rather own gold than oil over the next five years.