It’s possible…but there are valid reasons to hope they don’t.

February 10, 2021

Dear Fellow Investor,

On Monday Tesla disclosed in its financials that it had bought $1.5 billion-worth of Bitcoin.

The price of Bitcoin surged in response.

It’s obvious that Tesla CEO Elon Musk has a lot of influence in the markets. In fact, awhile back he simply added “#Bitcoin” to his Twitter profile and the cryptocurrency quickly jumped 20%.

As Bloomberg columnist Matt Levine recently wrote, “the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk.”

Somewhat buried in all the hoopla over Tesla’s purchase of Bitcoin was a note in the filing that the company could also purchase gold and other alternative assets in the future.

And that immediately spawned speculation of what such a purchase would do for gold.

Certainly, if Tesla announced that it had bought a significant amount of gold…or, heaven help us, if he added “#Gold” to his Twitter bio…the gold price would immediately catapult higher.

Of course, the gold market is, still, much larger than Bitcoin, and therefore harder to move. There are also big players with lots at stake in their Comex positions who would flood the market with fictitious, newly created paper gold to swamp the rally.

That said, the gold price is moved not by gross demand, but by buying pressure at the margin. A slight shift in buying pressure over selling pressure could allow the price to clear some important technical hurdles and attract trend-following buying.

As we’ve seen before, it doesn’t take much of a shift in sentiment to spawn a gold rally.

More importantly, Musk is highly regarded as a thought leader among younger investors. His entrance into the gold market would lead countless millions around the world to explore the argument for higher prices.

And of course, that argument is compelling and, essentially, irrefutable.

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Choppy Markets, But Some Trends Emerging

Right now, the metals markets remain choppy. On the release of the January CPI numbers today showing the headline rate at the expected 0.3% gain, but the core rate well below consensus at 0.0%, gold leaped about 1% higher and silver leveraged the move.

Yet after the early enthusiasm, both metals were driven down…along with the broader U.S. stock market. As usual, the drops in gold and silver defy simple explanation, as both Treasury yields and the U.S. dollar also fell.

Regardless, after dipping slightly into the red, gold has recovered and poked into the green just a bit as I write. As I commented in our last issue, simply refusing to fall is a major, and welcomed, shift in sentiment.

The bottom line is that gold’s behaving much better at this moment.

At the same time, copper is rocketing higher, further justifying our call of a new bull market in late July and bolstering the argument for a general commodity bull run.

The lesson from today, as usual, is to ignore these short-term fluctuations and keep focused on the fundamentals that will drive gold and silver prices far higher over the years to come.

And maybe, just maybe, Elon will echo those arguments at some point and give us a nice leg up.

All the best,

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