Strange Times for Gold

Brien Lundin Brien Lundin

Brien Lundin

December 4th, 2023 Comments

Gold jumped to a new record high on Friday...then spiked $75 higher in overseas trading Sunday...only to be smashed down in today's New York trading.

Not only gold, but all the markets are trading frantically right now. In other words, something's up – and smart investors will be prepared for anything.

The price of gold – and the emotions of gold bugs – have moved so much over the last few days that the only certainty at this point is that things are very, very uncertain.

As you can see from the chart below, which shows the active futures price and which I've also manually updated to show today's price move, gold had been on a tear since early November.

Gold Contiuous Contrack (Chart - December 1, 2023)

That rally culminated with a surge to a new all-time record high on Friday. On a spot basis, the old record was $2,063, and gold closed right at $2,071 last week. (The previous high in the futures market was just below $2,080)

In doing all of this, it set a new record for a daily, weekly and monthly close. It confirmed a “golden cross” as the 50-day moving average peeked above the 200-day moving average. From a technical standpoint, it was a major breakout.

1 Oz South African Gold Krugerrand Coin
1 Oz South African Gold Krugerrand Coin
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All of this undoubtedly served to bring in technically-based buying when gold trading reopened in Asia Sunday morning. But more important for gold was the report that a U.S. warship and several commercial ships were attacked by Houthi rebels early Sunday morning.

Gold spiked as much as $75 higher, and the timing indicates that the move was apparently caused by this news.

So gold was set up for the typical smash when New York trading opened this morning, and that’s exactly what happened.

Instead of trading much higher, gold is down about $45 as I write to about $2,025. That’s still not bad, but the question is what comes next.

Gold Needs More

A new record price or other “big number” often acts like a magnet for asset prices. Thus, I predicted that gold would set a new record in the very near term.

But, I added, for gold to avoid a quadruple top, it would need to decisively beat the old record, rising to somewhere over $2,100.

So did Sunday evening’s spike to around $2,135 do the job? Frankly, I don’t think so.

Considering that last night's price jump was largely due to a geopolitical flash point that has no influence on gold’s longer-term fundamentals, I think we can ignore it.

Still, it shows the attention that is being directed toward gold, largely from investors outside the U.S.

As I’ve also pointed out in recent days, this rally in gold is notable for the lack of Western investor participation. Total ETF gold holdings have yet to significantly respond to the rising gold price.

This is actually good news, as there’s very significant “fuel” remaining for this gold rally.

That’s over the longer term. Today, we see the Dollar Index rebounding and Treasury yields rising as the market digests some stubbornly hawkish comments from Jerome Powell on Friday.

1/10 Oz Australian Kangaroo Gold Coin
1/10 Oz Australian Kangaroo Gold Coin
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We’re also seeing the U.S. stock market down, but regaining some lost ground as the session wears on. More notable is a big rally in Bitcoin as investors speculate on ETF approvals.

Literally nothing would surprise me over the next few days for gold, but I remain extremely bullish going forward. Investors are falling over themselves in trying to price in a Fed pivot, and that event seems ever more inevitable in the weeks ahead.

Gold will be among the biggest beneficiaries of that event. It has traded with remarkable resilience as the Fed hiked rates and real rates rose, so it should rocket high as those factors reverse.

For now, watch the market and buy the metals and the miners on dips.

Brien Lundin

About the Author:

Brien Lundin is the publisher and editor of Gold Newsletter, the publication that has been the cornerstone of precious metals advisories since 1971.  Mr. Lundin covers not only resource stocks but also the entire world of investing. He also hosts the annual New Orleans Investment Conference. To get Brien Lundin’s ongoing commentary on the markets at no charge, click here to subscribe to his free Golden Opportunities newsletter.