Gold On Fire

It's getting crazy now, and it's obvious gold is telling us something.

It began last night, as the price of gold began to take off in overseas trading.

The chatter on X alerted those of us trying to get away from the markets for a few hours to what was going on. I took a moment from my BBQ to check the price. It was up about $40, no news.

It seemed that Asia, again, wanted gold.

Being a gold bug veteran of many a 2x4 upside the head delivered by Mr. Market, I restrained my enthusiasm until after the typical smash-down time on the New York opening.

Give them credit — they tried — but nothing could stop this train today:

After beating back a couple of bear attacks, gold took off with little remaining resistance. As I write, it’s up about $108 on the day. Silver can’t keep up to this rocket ship, but is still up very nicely.

Frankly, this move is somewhat worrisome. After a brief correction earlier this month, gold’s overheated status cooled off, with its RSI dipping back below 70. But it’s right back in the stratosphere after the remarkable surge in recent sessions.

Similarly worrisome, gold is catching a buzz in the mainstream, as illustrated by this text my daughter received this morning from one of her law school friends:

While I appreciate the shoutout...and my investment portfolio is indeed shining right now...this is the sort of thing that has my contrarian Spidey senses tingling. Is this kind of mainstream recognition a warning that the move in gold has peaked?

I don’t think so, at least for the longer term.

First, if almost everyone you hang out with and talk to is a contrarian, it’s hard to figure out what is truly a contrarian view. Pulling back and looking at the big picture, I believe what we’re seeing right now is merely the start of a long-lasting move into metals and the miners from mainstream investors.

There’s lots more to go before this bull market ends.

Second, I think gold is telling us something now. As I’ve written here recently, all investment markets are predictive mechanisms, but I believe gold is, along with bonds, the most sensitive of all.

It soared after the Covid shutdown not because inflation was soaring, but because it was discounting the inflation to come as a result of the rescue efforts from the Fed and other central banks. Pundits bemoaned gold’s lack of reaction when that inflation finally emerged, but gold had already reacted long before.

Today, gold is once again warning us of severe repercussions ahead...and perhaps a reordering of the global monetary system.

What these repercussions are will be revealed in time, although I believe they will involve an economic slowdown, another monetary rescue from the Fed, and the resulting inflationary effects.

In the meantime, despite gold’s rocket-like surge, gold stocks have managed to dramatically outperform the metal. Again, that’s clear in the chart below of the GDX/gold ratio, updated from when I showed it to you on Monday:

More to the point, the stocks in our Gold Newsletter portfolio are just beginning to take off.

I won’t belabor the point, except to say this: This train is leaving the station, and if you’re not on board, you’re going to miss one of the best investing opportunities of your career.

To get Brien Lundin’s ongoing commentary on the markets at no charge, click here to subscribe to his free Golden Opportunities newsletter.

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