I’m sure I don’t need to tell you that the Chinese retaliated in the trade war last week. Trump fired back on Friday, roiling markets even more. It was good to see gold doing its job as a safe-haven asset—and even better to see silver doing the same.
I’ve been saying that it would be normal for gold to take a breather before heading higher. I’ve been hoping for that, as I have gold and silver stocks on my radar that I’d love to have a shot at buying at lower prices.
On the other hand, the talking heads on financial media are suddenly fascinated with precious metals. Gold may well be the next flavor of the day.
As unscientific as it sounds, this gold market feels like it wants to move higher.
Have a look at this six-month gold chart, as of Friday’s close, that I sent to subscribers to my free, no spam weekly Speculator’s Digest on Saturday.
As highlighted by the red line in the chart, gold was dragging along a bottom last April and May, testing its lows. Then things changed in June, when the Fed threw the dollar under the bus in order to keep the economic party going in the US. At the same time, the trade war and geopolitical risks heated up again. It’s been off to the races ever since then for gold (and after a lag, for silver).
What really strikes me is the pattern after each break upward. As shown by the green lines, instead of retesting recent lows before heading higher, gold keeps testing its new highs before breaking out to head even higher.
As I told Speculator’s Digest readers, this doesn’t prove that gold has to shoot even higher soon… But look at what happened in overnight trading last night.
Gold shot up to a new six-year high near $1,550. That’s off the top of my previous chart.
The White House has since walked back some of Trumps more incendiary comments and asserted that the Chinese are calling for new negotiations. That seems to have calmed things down a bit, for now, and gold has giving back last night’s spike, as I type.
Whatever happens next, I think this price action shows that I was right…
Gold wants to go higher.
Keep that in mind and look at what happened after the first two green lines. Ask yourself: if market conditions haven’t changed, what’s likely to happen next as the current green line comes to an end—if it hasn’t already?
Then ask yourself if market conditions have changed.
Trade war still heating up? Check.
Geopolitical tensions running high? Check.
Fed throwing the USD under the bus?
Well, Wall Street didn’t like some Fed officials sounding more hawkish at the Jackson Hole meeting of central bankers last week, but the bond market is still predicting monetary easing by the Fed.
Now, I have to stress that I don’t know the future. No one does. But my speculator’s “spidey sense” is tingling. For whatever it’s worth, I do think the next leg is sharply higher.
I actually hope I’m wrong.
If I’m wrong, what’s next is likely a normal, healthy correction—and a great buying opportunity.
I haven’t yet bought the silver stock I just wrote up and want to add to my portfolio. It pains my discipline-loving soul to pay more for it than I could have last month. If gold and silver do take a break from their upward drive, I know exactly where I’ll deploy my cash.
But if I don’t get that chance—if gold and silver just keep rising—well, I won’t shed any tears. The rest of my precious metals plays will be soaring so high, one missed opportunity won’t rain on my parade.
I’m ready for gold and silver to take off.
P.S. For my help making the most of this emerging bull market, I suggest subscribing to my flagship newsletter, The Independent Speculator. But if you’re not ready for that and simply want my help keeping up with the markets, I encourage you to sign up for my free weeklySpeculator’s Digest, if you haven’t already. I promise not to spam you with a daily barrage of advertisements.
Monday, August 26, 10:33am, EDT, 2019