Gold bars close-up
Gold is supposed to be the asset of choice in times of turmoil and the cliché of clichés for a rise in gold was “war in the Middle East”.
Those days of clear links seem to be over and many attribute this simply to crypto. Bitcoin
BTC
is digital gold, or as the joke goes, “gold is bitcoin Boomer.” For me, there is no doubt about it. Bitcoin has diluted the use case for gold as an asset for dangerous times and this is particularly the case for the idea of capital flight where people who want to flee need an asset too light as possible, and Bitcoin simply has no mass. like the electrons that created it. However, for now, bitcoin is a private sector asset while gold is a public sector asset.
Some people say that gold is obsolete because it is just a commodity that is no longer used as currency and therefore is no longer money and just an element good for electronics and bracelets and that even its use in dentistry is no longer a big problem. However, this ignores the real reason why countries have gold reserves. Gold is for war. Gold is the only currency when a country’s back is against the wall and it needs to buy things from the rest of the world. Paper is not welcome, especially if you are on the losing side and/or inflating your currency to finance such a devastating situation.
So gold is not on its way out, especially when we see a rise in geopolitical instability. Gold is also supposed to protect against inflation, but that doesn’t appear to have been a factor either. The price of gold has not kept up with the price of eggs.
What now for gold?
Here is the table :
The gold chart: will it cross the line?
It’s a nice painting because it’s simple. If there is an advantage to technical analysis, this is the perfect chart to use. It indicates that if gold crosses this line, it will rise significantly. I’m toning down that phrase because the question of how “fair” is a much trickier decision. If not, the amount will drop to $1,800 or less.
I recently had a period of love for gold when inflation was going to explode and it was extremely disappointing, so I went back to my position as a gold skeptic, which I still hold. For someone who is not a gold lover, the solution is to average gold, which simply means buying a piece every once in a while, once a month, or once a week , or once a quarter, etc., whatever works for you, and just stack it. You can do this with an ETF, bullion, or even through random purchases of shares of gold mining companies. However, most people just want to know whether they should pile on now or not.
To me, the answer for speculators is to wait for a clean break beyond the old high. So it’s worth thinking about.
So let’s look at another graph:
A Roadmap for a Golden Bull Run
So here is the road map for a bull run for gold. It must first make a convincing new high, then break away from $2,200, and then reach a new high at $2,600.
However, this is unlikely to happen “just in time” and it is worth remembering that gold is inflationary. “What?” many will exclaim. Gold is diluted every year through its extraction. There are 3,000 tons of gold mined, which is at least 2% of the total ever mined, but if you exclude all the gold used, it’s about 10% of the float. It’s bearish if demand doesn’t change much, but bullish if there’s suddenly a panic. Even so, you can see that lately, gold is not sensitive to the kind of verticals normally associated with minor commodities or crypto.
So for the investor this remains a good time to buy and for traders there are clear levels to track.
To me the chart looks very strong. With falling interest rates and the potential for QE late next year or in 2025, built in previous inflation and enough wild men in global politics to burn down the house, the Gold should see ample support even as crypto continues to eat away at gold’s use cases.