A day after an encouraging rebound, gold is unceremoniously dumped again.

Will this bring on the much-needed capitulation?

March 3, 2021

Dear Fellow Investor,

I allowed myself a tinge of hope yesterday, when gold made a late-session rally to finish up about $14.

I should’ve known better, as the metal was trashed on the New York opening (go figure) and quickly dropped $36.

The gold bug community, as you can imagine, is on the verge of capitulation.

The question is, how close are they to capitulating? When will we reach the point of selling exhaustion that will set up the next move higher?

Frankly, I thought we were just about there a couple of days ago. And a couple of weeks ago as well. Yet gold continued to fall, smashing through the sturdiest, longest-held lines of support and evaporating hopes along the way.

And that’s how it goes. The absolute bottoms, like the peaks in bubbles, are only clear in hindsight. You’ll never take advantage of the top tick or the bottom tick…all you can do is try to accumulate when things look extremely undervalued and force yourself to sell when things look extremely overvalued.

If it was easy, everyone would be doing it.

But it isn’t easy, and we always second-guess ourselves along the way. This is illustrated by a Twitter conversation I had this morning, as the gold price was plummeting:

On the one hand, the way the gold stocks rallied so readily yesterday on gold’s rebound was encouraging, because it meant that investors were ready to jump back onboard with gold.

So with any encouragement from the metals, our junior mining stocks would soar.

On the other hand, this was an indication that the gold bulls still had strong hands. They hadn’t given up, so the potential selling pressure had not yet been exhausted.

So there was potentially further to go to the downside.

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Encouragement?

Interestingly, my tweet above seemed to mark the bottom in gold, at least for today, as the metal began to rally a bit from that point on.

And so the mind games go on.

The lesson is the same as what I’ve been preaching in these letters over the past few weeks and months: Look down the road and realize that — in an age of blank-check stimulus spending and central bank accommodation, with budget deficits measured in trillions of dollars, the prices of gold and silver will be far, far higher than today’s levels.

So don’t try to pick the absolute bottom. Instead, try to pick up gold, silver and high-quality mining stocks near the bottom.

And whether this is the nadir of the market or not, the time to buy is now.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference