“Gold is in a bubble,” “1600 are high,” “now begins a bearish cycle.”
These among the phrases I have heard the most in the past two/three months when mentioning a talk about Gold. Phrases I used to hear from various pundits airing on finance TV. I don’t want to name names, because it’s okay to have different ideas and I don’t want to discredit anyone. It just bothers me the belief that these people want to instill in other people’s heads.
When I used to claim that many analysts saw gold above $2,000 and that they were even right for me, they took me for a fool (I am talking about April).
This week Gold closes at $2037 an ounce. And it doesn’t seem to want to stop. Silver (but in general almost all metals) also went up. The opportunity was there on the gray metal, which showed one of the highest Gold/Silver ratios. Those who have been able to exploit it have certainly brought home handsome profits.
This BULL RUN of the Gold may seem absurd to you, but to me it is not so absurd. Let us set aside cyclical and technical analyses, which now leave time for them on this commoditiy, and focus on the macroeconomic, financial, and other landscape around us.
Gold has always been the only asset (commodity) that guarantees a “brighter future” in case of uncertainty (Along with the Swiss franc and the U.S. dollar, regarding currencies).
The lifeline where one can move one’s money when things get bad in the capital market (it is true, the correlation between the capital market and gold is strange and sometimes foreshortened, but in fact it is). -A real good shelter, where one can take shelter in stormy times-someone once said that to me. He had a point.
Let’s also throw in a dollar at risk of inflation and devaluation, thus weak and now unattractive.
In addition, restrictions due to Covid-19 have disrupted ore shipments and deliveries. So access to the same has been more difficult
Tom Brady, Chief Economist at Newmont Mining Corporation, says:metal supply from deposits is set to decline dramatically in the coming years.(more)
Perfect scenario for gold, fertile ground.
Our bullish positions from $1700 you have seen. They took us for fools. Yet. I still keep the long position partly open. I expect more rises, although I am scared that gold now is on everyone’s lips. My targets are distant and utopian, but I’ll throw it out there. 2300$ we can see it by the end of the year. If not, I will put my heart at rest. The first target of $2,000 we have already taken.
Does gold remain a good investment? The answer for me, at current prices, is ‘No.’ When there are these bull runs, a FOMO (Fear or Missing out) effect is created. That is, the fear of being left out of something that everyone is doing. In this case it is the purchase of gold. Reminiscent of bitcoin perhaps. And this can be dangerous and mislead the average investor. It is also true that the average investor has been shortaging gold since 1600 and continues to do so now. So watch out. If I didn’t have positions on Gold right now I wouldn’t open any new ones (then you know, it depends on everyone’s wallet).
I am not here to give advice on what to do or not to do on Gold. I am no one to do that, I always speak for myself. You simply try to interpret the signals, and on gold, in my humble opinion, they still remain positive. A lateralization phase even below $2,000 could be there, but I do not expect major descents.
Have a good Sunday and relax.
“Gold Is Money, Everything Else Is Credit.” JP Morgan