The problem with being a strong believer in the traditional value of gold as the safety trade is that one has to take slings and arrows from all sides.
The moonbeams will tell you that in the end, gold will return as a monetary standard for serious central banks in parts of the world. That is neither realistic nor feasible based on today’s electronic circus which allow micro-second currency manipulations by these very same banks and many of the fraudulent institutions that profit off of their actions.
The “coiners” which is an appropriate name for the cryptocurrency nuts will state that it is an antiquated relic of the Roman times and is no longer feasible as it is heavy, hard to transport, and rarely accepted by commercial traders. However when you remind that crowd of the low adaptation of private digital currencies, one gets called all sorts of insane names and that the boomer mentality in the modern era is over.
The survivalist camp points out that this is the ultimate barter currency, highly liquid, and viable as a last resort for raising hard cash or currency in any nation or just a simple person to person transaction.
This author falls into the last camp as it is much easier to store or move 50 one ounce gold coins than $100,000 in cash.
Thus the recent rally in gold prices is attracting both the inflationistas, Armageddon traders, and moonbeamers with the “this is it” move as the projections are for new all time highs. The recent price action looks nice and for once it would appear a break out towards the August 2020 could be in the offing.
The weekly chart above does not carry the volatility nor move back to the 2020 pandemic era, but begs the question, is this “it” in the goldbug world.
To review the potential of a breakout over a fakeout, one has to look at what a true long term chart demonstrates. That is why the chart below begins in January 2007 when the failure of the US financial system began it’s over fifteen year crash, resurgence, then decline once again.
If one has an extremely long term view and believes that the American financial system is masking great disarray and a risk of currency problems akin to the 2007-09 GFC, then the gold chart is logical and precise. A long term bullish trend is still intact despite a bear market between 2013 to December of 2018.
After the December 2018 financial crisis, gold began a rally which culminated in a new all time high as illustrated above. For this rally to continue in 2023 however, another new all time high with an even greater commitment of traders (volume) must occur preferably above $2150 per ounce. If that happens in early 2024, odds are gold will break out above $2500 per ounce quite rapidly as the US dollar weakens in the face of projected interest rate cuts to avoid a recession becoming political interference in the 2024 Presidential election.
Buckle up, the old relic might just have legs this time which means global geopolitical instability will be on the rise.
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What cannot continue will not. The current fiat/digital paradigm must collapse eventually. When it does people will demand a return to a tangible form of wealth that is difficult to debase, dilute and counterfeit. For millennia gold and silver have filled that need. No reason to think that won’t be the case in the future. But getting back to that point will be a long painful process.
[…] highs, and not quite to the point where I would declare this “the real deal” yet (see: Another Suspect Rally in Gold or the Real Deal?) let us take a second to review the known risks possibly fueling this rally even […]