Money Where My Mouth Is: Gold is Off to the Races

Call me old-fashioned (and many do), but I believe that making a "big call" ought to be an exceedingly rare event in finance. 

Of course, in this day and age of social media and finance intersecting amid the 24/7 content/news barrage you often see big calls literally around the clock. And when everyone is constantly making big calls, it almost becomes a situation where no one is. Furthermore, with the melt-ups in tech/growth and now crypto since March 2020, big calls often were nothing more than simply extrapolating the trends higher. Mind you, that is no small feat and ought to be commended. But then there are other situations where a certain asset class may be under-owned, overlooked, and ripe for the taking.

If you have been a long-term reader then you know I favor interpreting the price action day-to-day accompanying actionable ideas, all the while attempting to keep an eye on the big picture, too. 

In the case of the gold metal, you are talking about an asset which actually put in a good low back in late-2015/early-2016, as you can see in the center of the monthly chart for the GLD ETF, below. Since then, gold has actually turn in a steady-as-she-goes move higher. But to the chagrin of the new, impatient speculators it simply was too boring and nothing like the action-packed moves in crypto. 

So be it. 

As far as I am concerned, that type of analysis is best viewed through the rear view mirror. 

Going forward, my bet, both in my trading portfolio with a rare, outsized GLD position and in my long-term investing portfolio with several precious miners (as well as physical gold/silver I own), is that gold is off to the races and has just put in an intermediate-term low on the multi-quarter pullback since last summer. The arrow on the chart, below, shows a bull flag having formed and now trying to push higher.

Several bullish factors I see:

1. Gold continues to be under-owned and under-appreciated, even mocked (particularly gold bugs like Peter Schiff). This is contrarian bullish sentiment to me given that...
2. The technicals point to further bullish action on all timeframes now, provided that GLD holds above $150 for the foreseeable future. 
3. Even though Treasury Secretary Janet Yellen tried to appear rationale yesterday, The Fed itself is not acting rationally at all from a monetary standpoint, even now opining on the virus, climate change, social programs. Most recently, in the 1970s, gold served as an excellent hedge against a Fed Gone Wild. 
4. Crypto has stolen gold's thunder in a major way but is now displaying the classic signs of a late-stage mania. Crypto may very well be here to stay. But even the most maniacal HODL bull knows that the crypto corrections are legendary and one is likely around the corner. 
5. Crypto's surge in popularity provides the perfect "cover" for gold to climb a wall of worry for a long time before it becomes universally loved and owned. 
6. The U.S. Dollar continues to stumble just when it appears to be on the cusp of a short squeeze higher. 

Overall, I think gold itself can hit $3,500 per ounce in the coming quarters, and many precious miners can go up several times over. 

While a deflationary collapse could certainly derail gold (and most other things, for that matter), I think we get more of an inflationary push higher first before we see, once and for all, whether the inflation is transitory or not. I would also not be so quick to assume inflation is ephemeral this time around, especially given that the economy has been working through structural deflation for well over a decade now. 

Finally, gold was first used as money around 700 B.C.. It has intrinsic value and in many cultures around the world holds special value, too. To think that crypto has displaced it wholly is likely misguided. 

I am a gold bull and have my money where my mouth and plan to add more.