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February 23, 2020 | 3 Lessons from Wuhan to Help Put Gold on the Menu

Sean Brodrick

Sean is the natural resource analyst for Weiss Group. You can read his thoughts on gold, oil, cannabis, uranium and other natural resources at EdelsonInstitute.com

My mom was one of 13 children. Many of whom had oodles of kids themselves. So I’m not exaggerating when I say I have a LOT of relatives.

One of them is Chris Thomas, my cousin Penny’s son. Chris moved to China right after he graduated college. He met a nice girl there, Stephanie Li. They bonded over their love of Chinese cooking and got married soon after.

Now, they run the most popular Chinese cooking show on YouTube, “Chinese Cooking Demystified”. Most of the episodes are filmed on their balcony. This is a happy story.

At least, it was until the Wuhan virus hit.

Yep. This is one of those stories. But I promise there are great lessons — and gold picks — along the way. Just bear with me for a moment until I get to them.

Anyway, YouTube fame is enough for most people. But now Chris and Stephanie are getting written up in The New Yorker and featured on NPR. Not because they live in Wuhan. They live in the city of Shunde.

While Shunde is more than a thousand kilometers (639 miles) from Wuhan, the virus made its way to Shunde. And when that happened, the authorities put Shunde on lockdown.

Since the outbreak, more people in China are watching YouTube. Chris and Stephanie are becoming more famous. While the reason for the boost in fame isn’t the kind you’d want, that doesn’t mean the benefits should be ignored.

And that leads us to the first lesson …

First Lesson: Use Adversity as an Ingredient for Success

When you can’t go out to the market — heck, when the market can’t even get food — it’s very tough to do a cooking show.

But it’s not impossible. Chris and Stephanie make the most of what’s in their pantry. They get creative. For example, Chinese stir-fry with flour tortillas.

And they’re not alone. Many people in China are locked in their homes. In many places, you aren’t allowed out without a mask — and there’s been a run on masks. So, people have started putting their free time toward cooking.

Stephanie told The New Yorker: “There’s this kind of running joke or meme on the Chinese internet that [since the lockdown started in late January] everybody’s just become such a great cook.”

Second Lesson: Remove Panic from the Menu

Supplies are starting to come back into the markets. So, the worst may be over. Still, the precautions remain in place. Chris and Steph keep panic at bay with a thorough routine prevent the spread of germs.

Chris told a reporter:

First, I put on my outside clothes. Going downstairs … you do have to make sure that you don’t use your hands to interact with the world.

Once you get your stuff, you … change your clothes and wash your hands. In order to make sure we’re not infecting the pump on the liquid soap, we first use some bar soap and then we can press the pump to wash our hands. Everything we bought … we put it in its own quarantine. We put it all out on the balcony, spray all sorts of sanitizers on it and let it sit outside for a couple of hours.

That sounds fun, doesn’t it? Imagine if the panic over the virus spread to the United States!

Could that happen?

The panic over SARS — an illness related to the COVID-19 coronavirus now raging through China — lasted about two months.

Not too long, then. But remember, that was in 2003. Now, people travel a lot more. The world is more interconnected. Japan and South Korea have each reported multiple cases of COVID-19 as of this writing.

So, yeah, it could happen here.

I wish Chris and Steph good luck and good health. Now, it’s time to take these first two lessons they’ve given us and talk about gold.

Unless you’ve been knocked out in a coronavirus ward, you know that the yellow metal is on its own rampage. It’s been partly fueled by fears about the economic impact of the virus.

But that’s only the tip of the big, powerful forces lining up to push gold higher:

  • Negative interest rates …
  • Central bank money cannons …
  • Shrinking mine output …

And more.

Gold was going higher anyway. Fear over the Wuhan virus gave the metal an extra kick in the pants.

Now, I’ve shown you charts (examples here and here) of the recent bullishness in gold and miners. But you know that I like to take a longer-term, cyclical view. Here’s a multi-year chart that should shake the sleep out of your eyes.


 

Gold is very cyclical. It goes through bull and bear markets. You can see that gold was in a bear market, and then a base, for six years starting in 1996. It then blasted off in 2002 and racked up an 85% gain.

Gold then went into another bear market, followed by another base. That also lasted roughly six years, ending in 2019. Just to remind you, that’s when we started seeing the metal make big moves up. Since breaking out last year, gold is up 11.5%.

Third Lesson: Gold Is Cyclical

Even if history doesn’t always repeat, it often rhymes. I’d say gold has a lot higher to go.

So how do you play this? Right now, junior gold miners are leaving everyone else in the dust.

Here’s a chart showing the performance of gold versus three mining ETFs — the VanEck Vectors Gold Miners ETF (NYSE: GDX)Global X Gold Explorers ETF (NYSE: GOEX) and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) — since the metal broke out in November.


 

As I mentioned earlier, you can see that gold is up 11.5%. Comparatively:

  • The GDX is up 12.7%.
  • Explorers are up 14.1%.
  • And junior miners are up 18.7%.

Nice!

Some of the leading names in the GDXJ are Sibanye Gold (NYSE: SBGL)Kinross Gold (NYSE: KGC), and First Majestic Silver (NYSE: AG). These names are quite familiar to subscribers to my Gold & Silver Trader subscribers.

The Gold & Silver Trader portfolio holds other power-packed stocks, too. Some you might know. Some aren’t famous … yet. But they will be.

Heck, our best performer is a stock I can almost guarantee you’ve never heard of. And we’ll be adding a lot more. As I said, this bull is still young.

As with the best Chinese cooking, this gold bull has all the right ingredients.

If you’re doing this on your own, be careful. There are plenty of scoundrels out there, and bad luck can dog even good miners. Remember the first two lessons — use adversity (pullbacks) to your advantage and keep the panic at bay.

But the time to get active in gold and miners is now. Don’t wait until you’ve self-isolated yourself in your home and are looking for something to do. Leave that for your cooking lessons.

All the best,

Sean

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February 23rd, 2020

Posted In: The Edelson Institute

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