Gold is in consolidation. And it’s looking unbelievably strong. I have rarely been this optimistic: a more bullish-looking asset. And I have rarely seen a more optimistic consolidation! I'd have to go way back to the great days of the 1970s to remember something like this.
Gold, that most basic of monies, briefly reached $1550 in early September, having risen from $1270 three months earlier. Since early September, gold fell back to around the $1500 level, or just a few percent give-back. And it has been at that level for the past two months: from early September to now, as we're getting into early November.
A chart of that period would be the very definition of 'consolidation'. It speaks of tremendous strength in gold. From end-May to early September it has a tremendous rise of 22%. Then from the peak it falls back only 3%, and stays very close to that level for at least two months.
In fact, I have rarely seen a more optimistic consolidation: a more bullish-looking asset. I'd have to go way back to the great days of the 1970s to remember something like this. Thus, to me it is clear that gold is in consolidation, or resting, from its great rise. It is only a matter of time before a new bull leg will happen.
I do think it is pretty funny to hear that people who were predicting a fall in gold are now crowing that they were right. So it goes up over 22% in 3 months, and then falls back 3%, and they pronounce themselves vindicated. "See, I told you gold would fall back!" What I'm dying to know is how much an actual amount of invested money would have returned with this philosophy.
In fact, I'd date this current bull leg in gold to roughly mid-November last year.
Back then, it was $1200. But the real move began in late May at $1270, after having risen a bit under 6% from November to May: just about one percent a month. That is, before the explosion starting in late May. As we go into November, we must remember that one year ago gold was $1200. Now it is around $1500. That is a hefty 25% in one year.
And yet there is a lot of pessimism on the part of gold holders. There are several reasons for this. First, they didn't get in during the mid-November 2018 period. They got in at the various peaks, so it is not surprising that they aren't showing the sort of profits we are. They did not get in at the end of May or early June. Instead, they got in in late August or early September.
I follow the ebbs and flows of prices for a wide variety of asset classes: stock indices, precious metals, interest rates, and currencies. During the evening of Wednesday, October 30, I had a look and saw something I can't remember ever seeing before. I saw hours of markets that had not moved at all.
Here is what I saw:
With markets like this, even professional market watchers and money managers are able to take the day off. They could see a matinee movie. They could spend the day at the beach, if they lived in the right places. Or ski, if they lived in other places. Or play with a child. Or read a book. Or meditate. Or walk. Or run.
These flat markets may be a "calm before a storm". So be ready to move whenever the next phase begins.
Chris is a money manager and he has been sharing his insights with clients and readers since 1974. He regularly writes and publishes The Weber Global Opportunities Report, a subscription-only newsletter. With a focus on precious metals investing, the Weber Global Opportunities Report covers a variety of topics that should be of interest to Global Gold subscribers and clients as well.