Sunday, July 26, 2020 4:00 PM EDT
Gold is high, right? Correct, it’s even right below all-time highs, say ‘inches’ below it. But is it too high? Different question, and we would argue it is high but not ‘too high’. Whenever doubting about this type of question, just zoom out. In our gold price forecast predicted new all time highs, but only in 2021. So in a way our forecast is accurate, but it did materialize faster than expected … and this may just be the beginning.
The monthly gold price chart is the one we need. Below is the gold price monthly chart on 50 years. A few observations:
- We see some periods in history with accelerated moves up.
- The recent move (since 1200 USD in the last 3 years) is nowhere near parabolic. It looks like a warming up.
- The last 8 years marked a major cup, with a perfect reversal in the center.
- The energy on this chart is very bullish, and points only one direction: higher.
We believe the ongoing bullishness is not going to stop gold at all time highs, on the contrary. It probably is going to help push through it. A back test, once above 2,000 USD, may be expected.
For now, we see that the gold trade is the right trade, until proven otherwise.
Moreover, our COT indicator suggests we are nowhere near a crowded trade in gold, as of yet, subject to change of course.
That’s why we are planning to take a gold trade, both in our Momentum Investing portfolio as well as our Trade Alerts portfolio. Timing is unknown, it can be as early as Monday morning or in one / two weeks. Our open silver miner trade has an unrealized profit of approx. 15% (in less than 2 weeks), and we closed our short term SLV trade this week to realize +15% profits.
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Gold is unique in that it is one form of "raw wealth", that is, actual wealth and not "value-added" like manufactured goods. That makes gold rather more stable in value, although not in price. So when the price starts to rise it is an indication that the trust in the value of currency is dropping. Presently there is also that "bull factor" and emotions driving the price increase. (of course, lack of trust is an emotion, I guess).
So the rise in gold prices is a serious warning that trust in money is falling, which, given the inflationary actions of the fed, is reasonable. And the future will be "interesting", but not fun.