Uncharted Territory

Gold rockets through $2,000 into virgin territory.

Or maybe not. The metal’s next target is one it’s actually visited before.

Editor’s Note: Because gold and silver are rocketing higher, I’m sending Golden Opportunities readers my market commentary from this morning’s Gold Newsletter Alert, absent my comments on specific junior mining companies. — BL

Dear Fellow Investor,

At some point you just have to step back and watch in amazement.

On rare occasions, an athlete hits another level and absolutely dominates. Think Michael Jordan or Steph Curry at their best. Earl Campbell in his heyday. Flo-Jo or Usain Bolt. Or LSU’s football team last season. They all had their mojo and were unstoppable at one time.

Gold has its mojo now. And silver too.

Gold blew through the old price record of $1,920 early last week and, if you’ll excuse another bit of anthropomorphism, seemed to be gathering itself for an all-out assault on the magical level of $2,000.

It hit that mark with such momentum yesterday that it overshot the level by a considerable amount. For the record, spot gold closed yesterday up $41.70 (2.11%) to $2,019.40 bid, not far from its high of the day at $2,022.40. Silver executed another rocket shot, gaining $1.69 (6.93%) to $26.02. Platinum jumped $21.00 (2.30%) to $935, while palladium rose $35.00 (1,77%) to $2,013.

Notably, gold briefly traded higher than palladium once again, albeit only on a bid basis as palladium’s wide spread had the ask at $2,183.

The gold stocks were pulled along with gold and silver, with the GDX rising 4.61%, the GDXJ adding 4.92%, the XAU up 4.29% and the Gold Bugs Index (HUI) leaping 4.43% on the day.

This morning so far, gold has continued its run higher. At last check spot gold has gained $21.00 (1.04%) to $2,040.40 bid. Silver’s trajectory is still vertical, gaining $0.91 (3.52%) to $26.93. Platinum has gained $22.00 (2.35%) to $957, while palladium has added $32.00 (1.59%) to $2,045.

As I write, the gold stocks have yet to open, but I expect then to run higher with the metals once again.

Interestingly, the gold price was actually trading significantly in the red early in yesterday’s session. I should have tweeted it out at the time, but in looking at spot gold down $6 I wondered just how long it would take to get back in the green.

You can just tell when it’s a bull market, when gold and silver just want to go higher. And that’s precisely where we are right now.

But where we’re headed? Well, that’s another story. Because, as the headline implies, we are in uncharted territory now. We’re no longer aiming at old nominal record levels, or broken supports that are now resistance.

There’s just blue sky ahead and above.

So we need to come up with new comparisons and gauges. Foremost among these is the old record of $850 in January of 1980, but priced in current dollars. That level stands well over $2,800 today.

And as I tweeted yesterday, consider that the last gold bull market took the price up over seven times, during the course of a decade-long run. The move in the late 1970s took gold up over eight times in price from trough to peak.

With the low this cycle at $1,140, it’s almost scary to think what a similar run this time would imply.

But it’s not impossible to comprehend either, because these are unprecedented times. Never in world history have the majority of world economies simultaneously embarked on campaigns of money-printing and debt creation of degrees never before seen…and with interest rates pegged at 5,000-year lows.

Yes, the ’70s were crazy. But today’s monetary policies are arguably much crazier. The difference is that the repercussions of current policies have yet to be felt.

But investors around the world obviously believe they’re coming. And hard.

So who’s buying right now? Who’s behind the remarkable run of the past few weeks?

Obviously, there’s some short covering involved, and while last week’s Commitment of Traders report showed some of that in action, it wasn’t nearly as pronounced as I had expected.

The way the price turned around yesterday and then gained upward momentum as the day wore on, it seems like we’re also getting trend-following investors piling into the winning trade, including many Robinhooders and other newbies investing in GLD or other ETFs.

Reports that domestic U.S. bullion supplies have once again become scarce bolster the view that retail investors are piling in however they can on this move.

In addition to the above, I still maintain that we’re seeing the effects of big institutional money shifting asset allocations toward gold and silver. The steady buying that’s supported the metals on any bouts of weakness is an indication of programmatic purchases. And with the more-conventional (at least in the mainstream view) stores of wealth like bonds offering guaranteed losses, gold’s zero-yield is not only higher, but also offers exceptional capital appreciation potential as well.

Given the size of the monetary and fiscal stimulus already applied and the efforts yet to come, big money understands the trajectory for not only the dollar but all fiat currencies.

Readers of this newsletter have understood it for some time. Day by day, it’s becoming a popular view.

If you’ve built an insurance position in physical metals over the years at lower prices, I urge you not to sell. Gold and silver are signaling the tumultuous times ahead for the dollar and all fiat currencies, and this is precisely the scenario for which you bought bullion.

If you have a trading position in the physical metals, understand that the trend is now your friend. As CNBC contributor and all-around smart guy Jim Iuorio noted on Twitter yesterday, the “Toughest part of trading is how to trade a runner. #gold #silver.”

Gold and silver are “runners” now, and trying to time this move almost certainly means leaving profits, potentially large ones, on the table.

Although I believe I have a good sense of where gold and silver are headed after 35 years of watching them daily, I don’t trade them, so I’ll leave traders to their own counsel in regard to how to play this. But I would suggest fairly loose sell stops, as there will be a short attack from the “powers that be” at some point. I believe the broader trend is powerful enough to turn it away, but expect some volatility.

Overall, make sure you’re participating in this bull market. It’s going to be a doozy.

In regard to the junior mining stocks, all of us invested in the sector are truly enjoying these days. I unveiled six new recommendations in our last issue of Gold Newsletter delivered a few days ago, and I have some more on the way.

In the meantime, our favorite companies continue to make important news.

All the best,

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

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