Gold Pulls Back After A Strong Rally

Gold is not a stock, bond, or business deal… let alone a casino chip in a paper money casino. 

Double-click to enlarge this horrifying US government fiat versus gold chart. 

Gold is a currency. It is the ultimate currency… and as this 50-year chart shows, gold’s superiority over fiat is indisputable. 

Over time, it is very difficult to engage in a business deal that is better than just putting the money into gold and holding it. There are good business deals of course, and when investors get a “fiat profits score”, it’s important to put a nice portion of those profits… into gold!

Double-click to enlarge this daily gold chart.  

In the short-term, gold has rallied $100/oz from my $1671 area buy-zone, and the mining stock ETFs like GDX and GOAU have rallied 15%-20%.

That’s always a good time for traders to shift a bit of gold into fiat, and to sell some miners. A pullback towards support at $1754 (and perhaps to $1720) is in play.

Odds favour theis pullback ending between $1754-$1720, but if there’s a deeper reaction, $1566 is the next key buy zone where real money enthusiasts can take action.

 As I’ve noted repeatedly, in a higher rate environment where the main theme is “growflation” (followed by stagflation): long-duration equities and growth stocks tend to act like T-bonds; they flounder.  

Growth stocks do well in low growth environments where the Fed pumps the market with QE and low-rate welfare handouts.

“Think about what people love. They love long-duration equities right now… That shows that people are kind of ill-prepared for this higher inflation.” - Rich Bernstein, all-star investor, CNBC News, April 19, 2021.

The bottom line is that US equity bugs need to rethink their positioning; for ten years QE welfare handouts essentially went to Wall Street. 

Now they go to Main Street. 

Double-click to enlarge this spectacular GOAU weekly chart.

The 5,15 moving average series are on a buy signal, the price is bouncing from horizontal support of size, and there’s a magnificent channel breakout!

Growth stock enthusiasts should think about diversifying into some miners as the inflation theme intensifies.

Double-click to enlarge this interesting bitcoin chart.  

At my crypto newsletter, I’ve been urging investors to sell some bitcoin into this mighty rally and put the proceeds into key altcoins, but also into gold, silver, platinum, and palladium. 

A new study shows that 74% of money managers claim bitcoin is a bubble, but they said the same thing when bitcoin was $1000.

Fiat was the bubble, and it still is, when compared to private money bitcoin and gold!

My friend Captain Ewave thinks bitcoin is ripe for a simple Wave 1 reaction. I agree. The Coinbase exchange marked a peak against fiat. It was classic, “Buy the rumor and sell the news.”  The bottom line for bitcoin: In terms of the business of crypto, it is still early innings, but some of what goes up must be sold… to create wealth that is sustained. There is no better holding place for bitcoin profits (and profits from anything) than the ultimate currency that is gold.

“Even if commodity prices don’t soar, they could easily match or exceed inflation, and given this potential, commodities are still well worth considering as part of a long-term, diversified portfolio.” – Dave Kelly, Chief Global Strategist, JP Morgan, April 19, 2021.

As the Derek Chauvin trial sees American “blue hats” and “red hats” become more confrontational, I’ll remind investors that 2021-2025 is potentially both a US civil and global war cycle time frame.  I suggest investors consider trading in their red and blue hats of confrontation… for a money-making gold one!

Gold and related mining companies are set to benefit from an Indian population that could soon be heavily vaccinated and in GDP surge mode. The war cycle is a very large black swan. US and global inflation are already much higher than reported. This could become a quagmire for an America obsessed with solving its problems with debt and QE. 

The bottom line is that gold looks great, but what about silver? 

Double-click to enlarge this SIL ETF chart.  

Unlike gold stocks which had a full reaction to the downside, the silver miners have generally consolidated in a rectangular pattern. 

As gold reacts towards the $1754-$1720 area, investors who have minimal exposure to silver may want to think about taking a position in this ETF and its key component stocks. Silver may not be ready to soar like it did in 1979, but the price action is solid… and solid price action tends to attract serious money.

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