The Gold Breakout

This is the biggest story of the week.

Here’s JC Parets at All Star Charts:

There has only been one other month in the history of the universe where Gold closed at a higher price than it did yesterday. That was August of 2011. The trend here is still up:

There will be a lot of conversations about why it’s going up.

Some are buying because of the coming political instability surrounding the election. Some are buying because the Fed and other central banks around the world are continuing to kitchen-sink the pandemic response, to the tune of tens of trillions of dollars. Inflation fears, deflation fears, geopolitics, pick your reason.

Asking people why they’re buying gold is like like asking people why they smoke weed.

Your college roommate used to say it helped him focus on studying. Your girlfriend smoked to party. You got back into weed when the kids were born to help you relax. Your dad secretly smoked weed to fall asleep. Your mom’s boyfriend with the crystals and turquoise jewelry smokes so he can “reach a higher consciousness, man.” And then you run into those people who explain to you why they use indica sometimes and other times sativa, and on and on. It’s endless. And it’s not really important what the story is. Price is all that matters, it’s just a commodity. Either people want more of it or they don’t.

In my experience, these things trend and feed on themselves. There will be some popular narratives that arise to “explain” what has already happened with gold’s price. People will adopt these stories and internalize them into a belief system. Don’t do this. Let’s not get religious about trades.

Like every commodity, gold is subject to dramatic boom and bust cycles. It’s always a trade, having negative expected returns, but if bought and sold well, people can make money being on the right side of these trends. My firm’s director of institutional asset management, Ben Carlson, wrote to our clients about gold last night, and put together this look at the boom-bust cycle for the commodity:

I don’t think there’s any information from the history of gold rallies and slumps that will be helpful to predict the future price – but this history is supremely helpful to understand the fact that rallies can go on for a long time and end as abruptly as they began. If you just kept in mind this one fact, you’d be way ahead of most of the people you’ll hear talking about gold in the coming months.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. diamond painting commented on Dec 30

    … [Trackback]

    […] There you will find 53547 more Info on that Topic: thereformedbroker.com/2020/07/01/the-gold-breakout/ […]

  2. rbc sign in commented on Jan 28

    … [Trackback]

    […] There you will find 10454 additional Information to that Topic: thereformedbroker.com/2020/07/01/the-gold-breakout/ […]