Dollar bugs in the West view gold currency as a speculative gambling chip that has short-term bounces against their supposedly awesome fiat money. They claim that gold bugs are gold “perma-bulls” who need to learn to “trade” the metal against fiat.

Is there any validity to this view? Well, for some important insight into the issue...

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Bozo the US fiat clown chart 

Clearly, gold currency doesn’t need to be viewed as a casino chip… but perhaps the fiat dollar does?  

Gold is best viewed as a critical food or fuel component in life. Simply put, if it goes on sale, it must be bought.   

Amateur investors who tried the buy-and-hold approach with miners and failed (while holding little or no gold) are understandably demoralized and embittered.  

The good news is that their failure can be reversed… with a renewed focus on gold as the ultimate currency hold, and on miners as the world’s most rewarding trade!

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Gold has yet to dip significantly since the rally from my $1810 buy zone began.

The higher gold goes, the more likely a dip becomes. Note the large left shouldering on the chart, as part of a potentially significant inverse H&S pattern. The right shouldering process could see gold trade down to about $1950-$1930.

What about rates? Shouldn’t gold be continuing to soar as US interest rates swoon? Yes, but gold already soared while rates rose aggressively. In the short-term, falling rates are more likely to act as a cushion during a much-needed pause for gold than as immediate rocket fuel for more vertical price action.

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While falling rates will cushion a gold price reaction in the short-term, if rates break down from the developing H&S top pattern… the gold rally would resume, and do it with gusto!

Gold bugs of the world should also be open to a scenario where rates decline substantially at the same time as Israeli ground forces invade Gaza. The invasion could quickly turn into “Fallujah on steroids”.  

In this scenario, gold would likely soon be enroute to $2200, $2300, and $2400.

A ground invasion gone bad also could ignite widespread unrest in America, particularly if Iran and Hezbollah become involved and the price of oil shoots above $100/bbl.

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important gold chart

Flat-topped broadening patterns for gold typically indicate a significant loss of control is occurring around the world, and that’s obviously in play now.

Within the broadening pattern, some inverse H&S “action” is also beginning to present itself. It’s an incredibly bullish situation for gold.

As Ukraine becomes a gulag and Gaza becomes one too, it’s truly surreal that US president “Chickenhawk Joe” is attempting to drag US citizens into a third debt-funded conflict, this time with Taiwan. As part of the global 2021-2025 war cycle, civil war in America is becoming a more realistic scenario than it was even a few weeks ago. 

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“gold bugs dream” chart

Gold stocks have seemingly failed against gold for a long time, and only a major era of stagflation is likely to get them out of the current gulag and onto the rocket ride to Pluto that they deserve…

But have gold stocks really failed against gold? I will suggest the answer could be no.

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GDX weekly chart

When gold arrives at a major support zone, and does it with investor sentiment down, Indian citizens buying aggressively, commercial COMEX traders buying, and US rates at a sticking point…

When that happens all at the same time (as it has three times in the past year), gold stocks are a screaming buy, and they tend to dramatically outperform gold (and everything else!) in the ensuing rally from the buy zone.

A key rule of thumb is that gold stock investors can expect about two or three of these big buy opportunities each year.  

Gains of 20% on the low end and 200% on the high end are typical for the average investor who takes the buy… and they tend to occur in only a month or two from the time they took action.

Is this really gold stock “trading”? No. It’s prudent investing, but because the gains happen so fast from the buy zone, it feels like trading for savvy gold stock bugs. They are acting as the world’s most patient investors.

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GDX daily chart

Gold stocks have become overbought in the short term, but on the weekly chart, they are still oversold. As noted, a pullback to $1950-$1930 for gold is likely, and gold stocks should dip as it happens.  

The good news is that investors who failed to buy the $1810 area will almost certainly have a chance to take bold buy action soon, and perhaps today! Tuesdays are often a soft day for gold. Please click here now. Basis the BPGDM sentiment index, gold stocks are a roaring buy and they won’t be a sell until the index hits 70.The bottom line: Gold is the ultimate currency hold. Miners are investments to be bought with patience… then sold quite quickly with big profits and excitement!

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