Gold has been resurrected as the pre-eminent safe haven over the last few trading sessions, and there’s more to come.

November 9, 2022

Dear Fellow Investor,

It’s been an interesting ride for investors over the past week — and an exhilarating one for gold and silver investors.

First we had the Fed meeting last week, with Fed Chairman Jerome Powell essentially doubling down on his commitment to continue tightening in the fight to rein in inflation with little regard for the consequences.

In fact, he noted, the Fed always had the tools of renewed easing to repair any damage to the economy or fix whatever they broke in the financial system.

As I put it in an Alert to our subscribers at the time, “So, back to the boom-bust roller coaster ride of managed monetary policy, in which every course correction is an over-steer that leads to the necessity of another.”

In reaction to the Fed’s hawkishness last Wednesday, U.S. stocks sold off severely, while gold and silver suffered relatively less damage. The next day, gold dropped a bit again, but silver actually rose.

Then came the fireworks.

On Friday, gold soared in a fashion that we’ve rarely seen, leaping $52, or over 3%, while silver catapulted over 7% and the mining stock indices gained over 10%.

That was great, and unexpected, but it wasn’t the end. On Monday both gold and silver gave back some of their gains, but not much. Then, yesterday, the rally began anew.

Spot gold jumped over $37, or 2.2%, yesterday, while silver gained another 50¢, or over 2.5%. Platinum, palladium and the mining stocks also surged ahead.

So what’s up?

I’ve had a number of my friends in the industry, including other newsletter writers, email me asking what’s behind this remarkable move in the metals. I'll be as frank with you as I was with them: I wish I knew.

No one can point to any single event or precipitating factor behind the big rebound in gold and silver. However, there are lots of factors that obviously have contributed, including:

• The dollar has been weakening, with a few technical indicators delivering sell signals for the Dollar Index.

• During the recent sell-offs, gold refused to drop below long-term support, and as a result has traced out a triple bottom.

• There have been both reports and rumors of a big shift in China toward a post-Covid reopening.

• Despite the FOMC’s renewed hawkish rhetoric, many still expect that Powell & Co. are near the end of their tightening campaign. The very deep inversion of the 2-year/10-year yield spread in Treasurys, and the strong recession signal it’s delivering, have bolstered those views.

• The crypto markets have been in free-fall, thanks to the collapse of the FTX exchange — adding not only to market uncertainty, but leaving gold as the “new” (albeit 5,000-year-old) safe haven.

• Both gold and silver have been in severely over-sold conditions.

• As I’ve reported, there have been some signs of dramatic tightness not only in the retail bullion market, but also the large-bar and paper metals markets.

Those latter two factors, along with the explosive price gains in the metals, point toward short-covering as a major driver as well. While this often presents only a short-term effect, it can build upon itself and develop new up-trends that attract follow-on buying.

So what does the future hold?

We’re seeing continued deep sell-offs in U.S. equities and crypto today, while the Dollar Index is rebounding. Yet gold and silver, after yesterday’s big gains, are flat as pancakes...refusing to fall.

This is highly encouraging, and bodes well for the future.

I fully expect a bear attack on the metals in the days ahead. But given all the turmoil in other markets, the typical players may be too busy trying to keep their ships afloat to focus on the tiny metals sector.

Generally speaking, I’m now much more bullish for the next couple of months in gold and silver than before, largely because this rally doesn’t feature any single driving factor than can be reversed.

This is a much more broad-based move than we’d expected, so I recommend being positioned for a move that extends well into the new year.

All the best,

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