The Last Chance to Buy Gold Before it’s Boom?

Global stock markets rallied again overnight. The boost came from European Central Bank chief Mario Draghi, who suggested Europe could be in for a fresh round of stimulus.

Why not, Mario…it worked so well last time. But perhaps you didn’t quite do enough. So why not give it another go?

There is also the US Federal Reserve meeting that takes place tomorrow. No doubt stimulus-addled investors are hoping for a return to the ‘good old days’ from the Fed too.

While it’s not expected the Fed will cut rates tomorrow, bets have increased sharply that they will move next month. As The Wall Street Journal reports:

Stocks and bond prices have jumped in recent weeks as investors have bet on the central bank lowering the federal-funds rate for the first time since the financial crisis. Federal-funds futures showed Monday an 85% chance of a July rate cut—up from 25% a month ago and around the highest odds yet this year, according to CME Group.’

So the US economy is — apparently — in decent shape. Yet the market is muscling the Fed into a rate cut whether it needs one or not.

Or maybe the economy is in trouble. Maybe the facade of a stock market near record highs is obscuring that fact. We’ll soon find out.

Gold’s recent rally is telling you that all is not well, too.

On Monday, I pointed out that gold in Aussie dollars is at all-time highs. That’s an indictment on the Reserve Bank of Australia and its mismanagement of the currency. Not that anyone seems to care. No ‘respectable’ people are talking about it.

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The Price of Gold Continues to Break Out

As I write, the Aussie dollar gold price is trading around $1,960 an ounce.

But gold is also breaking out in other currencies. For example, gold in Canadian dollars just broke out to multi-year highs (see chart below). It’s the highest level since its 2011 peak.

Gold Futures Canada - GCSpot (NYMEX) - 1 Day bar Chart - CAD 19-06-19

Source: Optuma

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In euros, gold just hit the highest price since April 2017…

Euro Gold Futures - GCSpot (NYMEX) - 1 Day bar Chart - EUR 19-06-19

Source: Optuma

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Priced in British pounds, this week, gold hit its highest level since 2012…

Gold in British Pounds Futures - GCSpot (NYMEX) - 1 Day bar Chart - GBP 19-06-19

Source: Optuma

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In Swiss francs, gold is at a six-year high…

Gold in Swiss Franc Futures - GCSpot (NYMEX) - 1 Day bar Chart - CNY 19-06-19

Source: Optuma

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While priced in Chinese yuan, gold is also at a six-year high…

Gold in Yuan Futures - GCSpot (NYMEX) - 1 Day bar Chart - CNY 19-06-19

Source: Optuma

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Gold is a Wealth Preserver

Gold is starting to move, dear reader. Global capital is starting to realise this whole, juiced-up cycle is starting to turn. Risk assets have had their run. And it’s been a good one.

But now, the smart money is starting to take a position in gold. It sees storm clouds brewing, and wants to take cover before the deluge begins.

Central bankers, in their infinite stupidity, are trying to get ahead of the problem with promises of more stimulus. They want to weaken their currencies to get an economic advantage.

But they can’t all weaken together. They can, however, weaken together against gold, and that is exactly what is happening right now.

Except in US dollars. The greenback remains mysteriously strong. This must be frustrating Trump. He’s running trillion-dollar deficits, threatening tariffs against his largest trading partner, and harassing the Federal Reserve into easing rates.

Yet still the US dollar remains the strongest currency in the world.

That’s the problem when you have a relatively healthy economy. I mean, look at the competition. Britain and Europe are economic and political basket cases. Japan, is, well, Japan…and China is a communist dictatorship.

Why wouldn’t you park your capital in US denominated assets?

But, when even that mighty economy seems to be on the brink of a slowdown, where do you turn?

As I said, the smart money turns to gold. It’s a wealth preserver, not a wealth generator. With the global economy clearly slowing down, it’s only a matter of time before you see profit warnings start to flow from the economic bellwether stocks.

When that happens, the wealth preservation instinct will get another boost. As I’ve been saying for a while now, gold in US dollars is readying for a major move higher. It may still take a few more months to play out. You still might see another correction before the rally really takes off.

But it will be a correction that is well bought. That is, it’s likely to be a shallow one. It could well be the last chance to buy gold before the great gold boom gets underway.


Greg Canavan,
Editor, The Rum Rebellion

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Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

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