Gold is going up due to its classic role as a fear trade. At other points in the cycle the flight to safety can be to the US Dollar because other things are spooking the market, but when it’s fear of jurisdiction deflation and dollar weakness itself (the spectre of negative rates in the background, jigging it along nicely) that is suddenly less attractive. So people are finally piling into gold.THIS IS NOT GOING TO LAST FOREVER, SORRY TO BREAK THE BAD NEWS. Gold’s appreciation on the Fear Trade will last as long as the Fed says nothing about the change in direction which it will first jawbone, then announce formally. There is no way in the world that Janet ignores shouts of “One more raise and the market crashes” because the Fed never ignores these things, ever.
- The new jawbone will come.
- Then the subtle change of wording in a Fed presser will come.
- Then the policy will be formalized.
- Same as it ever was.It’s why the microphone is given to the Doves and the Hawks in turn, it’s the reason Gary Tanashian over at Biiwii/NFTRH refers to it as the Kabuki Theater. When it does, the fear will subside and you’ll get those annoying “gold losing its lustre” headlines in the semi-comatose bizpress channels.How long do we have for this gold ride? I don’t know, I’m guessing we get a few more weeks of bullish attitude towards the metal and I’m confident we’ll see North of U$1,200/oz, but that may turn out to be just a few days, I don’t know how panicky Janet and her pals feel right now. The advice therefore is to stay long gold stocks and add some more when you see fit, but don’t fall for all the To-Da-Moon-Alice narrative that’s equally as stupid on the other side of the shouting match. Gold’s move is welcome, but it’s not a straight flight to wonderland and the perfect day to cash in will be the day before the Fed makes its change in narrative clear. That’s virtually impossible to guess correctly so I’ll take the day after and the haircut that’ll come off the top of my paper winnings. I will not fight the Fed.Finally and to be clear, all the above addresses how I see the near-term market for gold and precious metals. In the medium and long-term I’m as bullish as ever. To sum up, I see further upside in gold stocks, then a jag down at some point in “the next few weeks”, then a period of consolidation, then the return to gold price appreciation. So make the most of what the market is offering us at the moment.
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Here's an example of what happens in the subscriber IKN Weekly, out every Sunday evening. This is how the (rather long) intro to IKN352 dated February 7th came to a close and as subscribers know well, I've put my money where my mouth is on this call these last couple of months.