Here’s an example of what happens in the subscriber IKN Weekly, out every Sunday evening. This is how the (rather long) intro to IKN352 dated February 7th came to a close and as subscribers know well, I’ve put my money where my mouth is on this call these last couple of months.
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Gold is going up due to its classic
role as a fear trade. At other points in the cycle the flight to safety can be
to the US Dollar because other things are spooking the market, but when it’s
fear of jurisdiction deflation and dollar weakness itself (the spectre of
negative rates in the background, jigging it along nicely) that is suddenly
less attractive. So people are finally piling into gold.
THIS IS NOT GOING TO LAST FOREVER,
SORRY TO BREAK THE BAD NEWS. Gold’s appreciation on the Fear Trade will last as
long as the Fed says nothing about the change in direction which it will first
jawbone, then announce formally. There is no way in the world that Janet ignores
shouts of “One more raise and the market crashes” because the Fed never
ignores these things, ever.
- The new jawbone will come.
- Then the subtle change of wording in a Fed presser
will come.- Then the policy will be formalized.
- Same as it ever was.
It’s why the microphone is given to
the Doves and the Hawks in turn, it’s the reason Gary Tanashian over at
Biiwii/NFTRH refers to it as the Kabuki Theater. When it does, the fear will
subside and you’ll get those annoying “gold losing its lustre” headlines in the
semi-comatose bizpress channels.
How long do we have for this gold
ride? I don’t know, I’m guessing we get a few more weeks of bullish attitude
towards the metal and I’m confident we’ll see North of U$1,200/oz, but that may
turn out to be just a few days, I don’t know how panicky Janet and her pals
feel right now. The advice therefore is to stay long gold stocks and add some
more when you see fit, but don’t fall for all the To-Da-Moon-Alice narrative
that’s equally as stupid on the other side of the shouting match. Gold’s move
is welcome, but it’s not a straight flight to wonderland and the perfect day to
cash in will be the day before the Fed makes its change in narrative clear.
That’s virtually impossible to guess correctly so I’ll take the day after and
the haircut that’ll come off the top of my paper winnings. I will not fight the
Fed.
Finally and to be clear, all the
above addresses how I see the near-term market for gold and precious metals. In
the medium and long-term I’m as bullish as ever. To sum up, I see further
upside in gold stocks, then a jag down at some point in “the next few weeks”,
then a period of consolidation, then the return to gold price appreciation. So
make the most of what the market is offering us at the moment.