Gold has a fanatical audience, and it has had that audience as the generations have rolled through even though the gold fans of my childhood have long since passed away. For gold lovers it is the ultimate money, the value of which is incorruptible, and when it seems cheap to them they want to buy more and simply say the world is wrong about its value and that situation will change.
Since lows around $200 in the 1990s gold has indeed done very well, but that ascent has come to a halt.
Here is a chart:
Until the Israel/Gaza conflagration gold was trending down in a bear wave that has typified gold’s performance since the bull trend end in 2011. The great central bank QE helped gold hit new highs but at nothing like the levels you would expect from a period of such uncertainty and explosive money supply creation. Since then gold has been stuck with $2,000 a channel ceiling.
The call on gold is simple. Is the current strong rally just a short term move based on the old classic gold catalyst “war in the Middle East” or is this the moment that gold takes its long awaited big move up?
These days many of the old laws of investing no longer apply. Interest rates going up or down does not seem to directly affect gold as it once did. Bitcoin
BTC
is now seen by many as the first port of call if they need a haven asset. Gold has not behaved as predicted by the gold bugs when the horsemen of the apocalypse showed up. Gold is boomer bitcoin say the young folk.
I wrote recently that the call is simple. If gold can clear its post-2019 highs it will go on a big run. If it doesn’t it will continue to be pinned in the $1,500 to $2,000 range until further notice. A lot of gold is mined every year so there is a constant downward pressure on its price. Between 1%-2% of total supply is mined each year and when you consider most gold is inert and locked up for good in vaults, that 1%-2% of total supply is a good proportion of the liquid supply in circulation. Bitcoin is also in competition with gold, too and preferred by many to a clunky, hard to move, protect, buy and sell metal. As such, it’s not hard to see gold going nowhere for a decade or two as it did after its high during the Afghan war.
However, markets don’t work like that; when they boom they do so for reasons that are retro-fitted to explain them so while Captain Hindsight is in charge it’s hard to be Major Foresight on big moves.
However, the chart is very clear. Gold should pull back soon and start to slip back down but if it breaks out it could run for a $1,000 or more. That break out level is $2,150 or above depending on your nerve ends.
I dollar cost average gold for diversification so I don’t care much about the short term but it will certainly do me no harm if we get a break out because such a move will be a large one if it comes.
It will also demonstrate gold still retains its place as more than just a commodity and isn’t on the road with its boomer fans to obsolescence.
Meanwhile for those that like it spicy there is always silver, because it gold goes on a run, silver will run further.
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