The price of gold just soared past $5,000 per ounce.
The yellow metal is now up about 150% over the past two years … a move that caught most everybody off guard.
I’m a systematic trader and all my models are designed to be adaptive, so I’m pleased to say I’ve been able to put my subscribers in a number of profitable gold trades, going as far back as 2023.
And as I outlined in a livestream presentation in early January, my Infinite Momentum Alert system absolutely nailed “the gold trade” in 2025.
Though the question now is … will it continue?
For that, it helps to consider why so-called “gold bugs” buy gold.
See, unlike stocks, which represent ownership interests in real, profit-seeking businesses … gold has no earnings, no sales, and no dividends.
It has no “fundamentals,” per se, as its industrial uses are pretty minimal. That makes it difficult to say whether it’s “expensive” or “cheap.”
Instead, gold is widely viewed as a multi-purpose hedge.
It’s protection against inflation and against currency devaluation. It’s a tangible asset that offers diversification in a world where most wealth is digital. It doesn’t rust… it doesn’t decay. It just “is.” In a world where everything seems to be moving far too quickly, gold offers a sense of permanence.
More than anything, perhaps, the move in gold reflects a loss of faith in the system.
After the explosion in inflation following the pandemic, the Federal Reserve’s reputation was already mud. The recent attempts by the White House to exert more control over the Fed (and force interest rates lower) has only made it worse.
There’s also virtually no faith in Congress’ ability to bring the budget deficit under control. The national debt will blow past $40 trillion this year, and we’re adding about $2 trillion to the total every year. That’s a ticking time bomb just waiting to explode.
Not to pick on Uncle Sam, by the way… The Japanese bond market sold off aggressively last week as investors have made most of the same arguments about the Japanese government’s mismanagement of the financial system.
I’m not a doom and gloomer, and I never will be.
I simply saw the movement in gold as a fantastic trading opportunity and delivered multiple monster trades in gold mining stocks last year in my Infinite Momentum Alert.
For instance, last month I closed out a 131% gain in Barrick Mining Corporation (B) that we had held for about six months. And we had various other gold miners with returns ranging from 32% to 66%.
But there’s more to this story and it goes far beyond gold.
As I have been writing for months, I believe they point to strong returns in the tangible “old economy.”
Apart from a lack of faith in the financial/political system, there’s also a budding realization that the AI revolution doesn’t magically just spring out of the ether. It requires trillions of dollars in infrastructure investment.
So, it shouldn’t be all that surprising to see energy and materials enjoying a strong week. The State Street Energy Select Sector SPDR ETF (XLE) and the State Street Materials Select Sector SPDR ETF (XLB) finished last week up 3.3% and 2.1%, the continuing their run of strong performance.
Meanwhile, utilities continued their run of underperformance. The State Street Utilities Select Sector SPDR ETF (XLU) finished at the bottom of the pack.
Key Insights:
- The explosion in the gold price shows a lack of faith in the system… and a preference for tangible assets.
- Following this trend, energy and materials continue to outperform.
- Utilities continue to show weakness.
Drilling into the Energy Sector
I ran my customary screen of the biggest movers last week that were also still within 10% of their 52-week highs. The idea is to look for strong, market-leading stocks that are getting stronger.
One stock may jog your memory…
As I noted on Thursday, oilfield servicer Halliburton (HAL) recently popped up as “Bullish” on my Green Zone Power Ratings System. With the probably reopening of Venezuela’s oilfields to Western investors – and the estimated $100 billion in new investment to make that happen – Halliburton could be one of the biggest beneficiaries.
Rivals SLB Ltd. (SLB) and Baker Hughes (BKR) are also potentially winners from that trend, as the three companies together dominate the industry. All three rate as “Bullish” on my Green Zone Power Ratings system.
Of course, no conversation about energy is complete without at least a casual mention of ExxonMobil (XOM), the world’s largest integrated oil major. Exxon also rates as “Bullish” and offers exposure to virtually the entire energy value chain.
Stay Away from Utilities
I also ran my weekly screen of stocks that have fallen hard but are still within 10% of their 52-week lows. The idea is to find stocks that have been beaten-down and might be good candidates for buying the dip.
Well…
After the runup in utilities prices over the past year, there were only three stocks that met that criteria… and none rated particularly well on my Green Zone Power Ratings system:
As I wrote two weeks ago, “utility stocks have been trending lower since October but remain well above their 52-week lows. That suggests it’s likely far too early to consider buying the dip. We’d clearly be fighting the tape, and that’s almost always a bad idea.”
I’d stand by that comment today. Utilities are stuck in a no-man’s land in which growth investors are starting to turn cautious yet the stocks aren’t cheap enough to attract value investors. For now, it makes sense to stay away.
To good profits,
Adam O’Dell
Editor, What My System Says Today
