The important change in sentiment toward gold that we talked about two days ago continues today, as the metal is rising strongly as stocks and cryptos continue to plummet.

This is looking like the start of something big.

May 19, 2021

Dear Fellow Investor,

You simply couldn’t ask for a better performance out of gold today.

The day brought tech stocks continuing their slide and — more importantly — that sell-off now seriously infecting the entire U.S. equity market...as well as cratering the crypto sector.

It began as one of the “sell everything but the kitchen sink” days, with a liquidity vacuum that sucked every asset down the drain.

Included in that number, as expected, was gold. The metal gave up about $20 in early-morning overseas trading, and gold bugs everywhere were dreading the typical slaughter on the New York opening.

Except...it didn’t happen. Gold made a U-turn immediately upon the open and burned rubber to the upside. It not only wiped out the $20 decline, but added another $15 on top of that.

And all of this in the midst of a bloodbath in virtually every other asset.

This is impressive. And important.

A Paradigm Shift

On Monday, I explained how gold appeared to be beginning the very important shift in sentiment that we’d been expecting, or at least hoping for. That shift is a change from an automatic selling of the metal along with every other asset class whenever there was any development that could possibly encourage the Fed to tighten monetary policy.

With the “everything bubble” having been blown up in recent years by Fed liquidity, and especially during the post-pandemic flood of monetary adrenaline, gold had been moving in lock-step with all other markets.

Everything was being floated upon the ocean of central bank liquidity.

And not only that, but gold also suffered through the first few months of this year as the bond market began to react to the first inklings of higher price inflation. Virtually every new development was viewed as a stick with which to beat down gold and it underperformed even as equities continued to soar.

But then all the sellers were exhausted, and gold put in a double bottom in March. It rallied from there but, as I’d been noting, we weren’t going to see a truly powerful rally until investors started to view gold as an inflation hedge once again.

Again, that’s the sentiment shift that we’re seeing right now. In fact, it’s so important that I view it as nothing less than a paradigm shift...and the beginning of a major new bull run.

That gold beat off the sellers and is rising strongly in today’s sell-(almost)-everything liquidity crunch could not be more impressive. Yes, the 10-Year Treasury yield has dropped in reaction to the selling — a development that is itself very interesting — but the Dollar Index is actually rising. Yet gold is barreling ahead.

Regardless of what happens the rest of today or over the next few days, if equities bounce back on some Fed reassurance and even if gold gets whacked by a flood of Comex selling, today’s performance tells us that gold can and truly has regained its traditional role.

The gold stocks are mixed today, reacting to both the weakness in broader equities as well as the strength in gold. So if you aren’t yet positioned for a new gold bull market, you still have time.

All the best,

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

P.S. Just as we were about to hit “send,” the Fed minutes revealed that the FOMC might be beginning to think about thinking about tightening monetary policy, and to do that thinking at some point in the future.

This created brief havoc in the over-sensitive markets, including a sell-off in gold that took the price negative for a bit. It’s now back in the positive zone, but essentially flat and fighting off a bear counter-attack.

Bottom line, I believe the points I made in this issue remain valid. In addition to the sentiment shifts I describe, investors will eventually also realize that any Fed hikes will keep interest rates well behind the rate of inflation, because they have to be.

And thus, the rationale for holding gold will remain as powerful as ever.