New Secular Bull Market In Gold Confirmed (…by Bitcoin)

A new secular bull market in gold has now been confirmed. As you may recall from an earlier edition (of The Bitcoin Capitalist), I was mulling over re-allocating my decades-old gold stock portfolio into Bitcoin and crypto – which I did.

As if on cue, gold has put up a new string of all-time high’s since. But it is yet to crack that  $2,590 USD level, which is the inflation-adjusted high from the 1980 cycle top. That was my marker for when the gold breakout would be “for real”. It hasn’t happened yet, but precious metals do appear to be off to the races. It looks like we’re in a genuine bull market.

Now it’s official.

Gold just had a quarterly close at record levels, likely marking the beginning of a secular bull market.

This is indeed one of the most exciting times to be a precious metals and commodity investor that I can recall.

Game on. pic.twitter.com/Cbr5V0TUgj

— Otavio (Tavi) Costa (@TaviCosta) March 29, 2024

Interestingly – gold is putting up new ATHs while the gold ETFs are experiencing outflows, so where is the buying pressure coming from?

For one, central bank purchases of “the barbarous relic” are at new highs.

Via Tavi Costa (again):

I'm old enough to remember when The Wall Street Journal said that gold was losing its reserve status in September 2022.

Instead, what we've witnessed is a record pace of accumulation of the metal, primarily driven by central banks. pic.twitter.com/l0SncORsaI

— Otavio (Tavi) Costa (@TaviCosta) March 20, 2024

Do I regret reducing my exposure? Not really – my approach to the rebalance was to dump the dogs: companies I had been holding for over a decade which still hadn’t come close to exceeding their 2011 highs, or in some cases their 2009 highs.

For the ones that were up significantly and displaying momentum in response to this new cycle, I took profits on some of those positions, keeping 50% or more.

The bulk of the re-allocation was the redemption of a gold mutual fund I had been DCA-ing into since 1999 – which did OK, but not as good as the winners I had kept

(Eldorado, Wheaton, New Gold, and Aginco-Eagle).

I left my silver miners largely untouched, because I think silver – really, honestly, truly – could be finally getting ready to move

(Click on image to enlarge)

(I wrote that a little over a week ago, andSilver has since indeed finally begun to move…)

Gold bull confirmed by correlation with Bitcoin

Two things about gold make me confident that this is a new, secular gold market:

1) It’s putting up new highs in rapid succession.

It looks like the early stages of what Bitcoiners call “up-only” mode.

If we look at previous all-time highs, which I was doing in my last post about this topic, where I wrote:

“Historically, fresh all-time-highs portend drawdowns for gold… After the 1980 all-time-high, it took 28 years for gold to put in another one, in nominal terms. In inflation adjusted terms, gold still hasn’t surpassed the 1980 top“

Further, it took another eight, and three years respectively for gold to put up fresh ATHs since 2011.

So it was unknown if the December high would lead to a new wave of successive highs, or presaged another pullback that could drag on for months or even years.

A protracted retreat from the high did not happen, instead surging ahead and continuing to post fresh, successive new ATHs.

2) Gold is converging with Bitcoin

Until recently, neither gold nor Bitcoin were truly behaving as those “safe havens” or hedges against currency debasement that underpinned the investment thesis behind both. Bitcoin was trading more or less with the Nasdaq like a tech stock, Gold was just languishing for months and years on end between peaks.

All the while, the infighting between Bitcoin maxis and goldbugs like Peter Schiff (who is fixated on the meaningless minutiae of daily price deviations between Bitcoin and gold) is intensifying along with the price action.

But the bigger picture indicates that gold is surging higher with Bitcoin, not versus it – and the big loser, is fiat.

(Click on image to enlarge)

When you look at the weekly chart, gold, and Bitcoin have been convering on higher correlation since last August.

Bitcoin is also putting up successive new highs (and also doing it ahead of the halving, which has never happened before).

Bitcoin’s correlation with the Nasdaq has returned after decoupling for most of last year, but with stocks back near all-time highs again (even Japan’s NIKKEI hitting new ones as that country trips into recession) – and now with silver moving – it feels like Everything Bubble 2.0 could be in the offing: the central banks are getting ready to cut and everybody knows it.

And on this cycle, as I’ve been expecting for a long time – the next cycle will see a change in sector leadership that will include hard assets like gold, silver, commodities, and, yes, I count Bitcoin among them.

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