Gold's Brick Wall

For the past four years, every time gold hit the 1350-1370 level or so, it is turned down sharply.

Yesterday, gold surged nearly $24 intraday. John Rubino at Dollar Collapse noted Gold Tests Resistance - Again, posting a similar chart.

A monthly gold chart provides much needed context.

Gold Monthly

What Have You Done For Me Lately?

As an asset class that has performed quite well since 2000, it's interesting that gold is so despised.

The popular games at the moment are "momo", TINA, and passive index investing. In reality, it's all the same game. Eight stocks in the nasdaq make up 48% of the index.

If you are in the Nasdaq index and think you are not hugely involved with high-price momo-darlings, you are mistaken. The S&P 500 has a 41% technology weighting.

TINA says There Is No Alternative, not even gold.

The Herd

The Herd is right until it's massively wrong, just as happened in 2000 and 2007.

Technically Speaking

Technically speaking the longer gold is bottled up beneath this resistance, the faster the move once it does break out.

Fundamentally Speaking

Passive investment, TINA, and MOMO strategies will get crushed (timeline unknown), the late-stage economy will hit recession, and the Fed will respond with cuts.

It's a mistake to assume stocks will respond the same way next time as they did the last three times the Fed pulled a QE rabbit out of its hat.

It's not too hard to envision a scenario in which gold is the beneficiary the next time central banks attempt to inflate. And that is what I believe will happen.

Mike "Mish" Shedlock

Comments (40)
No. 1-25
Robin Banks
Robin Banks

Gold monkey hammered back down $20. If I was Putin, now he's accumulated 2000 tonnes of physical gold, I would do a raid on the LBMA for a quick 200 tonnes and demand delivery. Would cause panic without firing a missile.

Onni4me
Onni4me

I've been thinkin to put some money in gold. Not necessarily physical gold bar. Any suggestions how to invest in it without having to store it?

Wagner_
Wagner_

Here is a good podcast with George Selgin - https://www.youtube.com/watch?v=SQ547i8tFIo
While I don't necessarily agree with all of the points he is making it is still worth to watch.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

OUNZ, Bitgold, Goldmoney, Bullionvault - All of those are physical gold - The smaller the quantity the more the first two are favored

AWC
AWC

@Mish, "Passive investment, TINA, and MOMO strategies will get crushed " Add to that, "Risk Parity" and you have it. Question of course is always when? Funds of funds of funds of funds, yada, yada.