The markets are throwing the hissy fit that we predicted, raising the stakes for the Fed’s meeting this week.

The good news: Gold is holding its own as a safe haven.

January 24, 2022

Dear Fellow Investor,

I’m watching today’s accelerating market chaos without a sense of schadenfreude.

Even though we knew it would happen at some point, and everything from equities to crypto was enormously overvalued, it’s not right to take pleasure in others’ misery.

For one thing, I’ve been in their shoes before, as has every committed gold bug.

All that said, I am watching the stock and crypto markets plummet with some detachment, because gold is holding its own. As I write, spot gold is up about $5.

The rest of the complex, from precious and base metals to mining stocks, is down, but the fact that gold is standing strong is a very good sign.

It means investors are looking at gold as a safe haven, and that hasn’t always been the case. Also helping the yellow metal is the fact that, after months of weak price action, it isn’t widely held by speculators. Thus, they can’t sell it to raise cash for margin calls.

I’ve always warned that a liquidity vacuum like what we’re seeing develop today is dangerous for all asset classes, including gold. Right now we’re doing fine with gold, but if this broad sell-off continues much longer, it could still get pulled down along with everything else.

Which brings us to the big question…

What’s Next?

I’ve been predicting that the markets would throw a hissy fit like this as the Fed attempted to tighten monetary policy. An important part of that prediction is that Powell & Co. will at some point listen to its marching orders.

They simply can’t afford to allow the house of cards to collapse.

The question is, when will they blink?

I don’t think they can afford to just yet. Remember, they haven’t even begun to tighten! All they’ve done is talk. If they reverse course now, they’re simply throwing the last shred of their credibility out the window.

But they can ease their rhetoric a bit — which I expect them to do in this week’s Fed meeting that concludes on Wednesday. And while gold has done well in this decline, some less-hawkish talk this week should also benefit the metal on the upside.

Looking further down the road, we know that the Fed won’t be able to get too far in its normalization plans. Even if it can withstand the turmoil in the financial markets, the cost of servicing the Federal debt at higher rates will present an insurmountable roadblock.

So what to do now?

That depends upon your personal situation, so don’t take anything I say as investment advice. But generally speaking, I feel the Fed will have to assuage the markets, and we’ll see a big rebound when that happens.

In short, I’m not selling anything into this downdraft.

What I am going to do is look for bargains in the junior mining space — and there are plenty right now — because I’m confident that virtually any road forward is bullish for the metals.

For those who feel the same way and who aren’t yet subscribers to Gold Newsletter, I urge you to sign up now.

Our February issue will be published this Thursday, and it will feature updates on dozens of top junior miners, including two exciting new picks I’m debuting this month.

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All the best,

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