It’s not the most talked-about New York Times story this week, but it sure is interesting. And, with USA Today running a similarly themed photo essay, it can surely be said that gold is a hot topic.
The Times focused on prospectors panning for gold in a valley about an hour outside Glasgow, Scotland, but their motivations are global:
Not only do many Britons have more free time because they are on furlough, but the coronavirus pandemic has also made outdoor pastimes more attractive.
At the same time, the price of gold has surged close to $2,000 an ounce, and interest in it has also been propelled by the news that Scotland’s first commercial gold mine plans to start production in November.
USA Today’s piece, “Prospecting for gold finds new fans amid pandemic, uncertain economy,” centered on the Magpie Gulch in northern Montana.
Though the mainstream media on the gold story could be construed as bearish, a variation on the “curse of the magazine cover” is widely considered a contrarian indicator.
Alas, at least in the very short term, that’s not the case. Gold was up on Monday, with the spot price adding nearly 1% to trade at $1,878.49 around 1:30 p.m. EDT.
That’s nearly 2% below where it was a week ago. And it’s about 9% below the all-time high registered in early Augustf when the yellow metal traded as high as $2,063.54.
As Sean Brodrick noted in his Sept. 26 note to Wealth Wave readers, this pullback is a buying opportunity.
Here’s Sean …
Gold had a tough week, ending near two-month lows. Now, the babbling class on Wall Street is rushing to put the gold rally in its coffin.
Don’t believe it!
Gold ALWAYS zigzags. And there are fundamental forces in play that point to much higher prices. That means you should be using a pullback like this to add metal and select miners.
The recent pullback in gold is due (mainly) to a long-overdue rally in the U.S. dollar, which is putting in a pretty good dead-cat bounce.
Source: Finviz You can see that the U.S. Dollar Index has pushed up through one level of overhead resistance. Stronger resistance is right overhead.
Since gold is priced in dollars, as the dollar goes up, gold (generally) goes down. But when the greenback tops out again, gold will likely go higher.
And since this recent pullback is shaking out the weak hands, the next move could be quite big.
While we are watching gold, it is the action in miners that is our main interest. Here’s a chart of that …
Gold miners, as tracked by the VanEck Vectors Gold Miners ETF (NYSE: GDX, Rated B-), have stopped moving higher. It’s not unusual for miners to move sideways or consolidate for a while; now we’re waiting to see where the GDX finds support.
If this sell-off lasts for a few more days, that might be long enough for the 200-day moving average to rise to the first line of Fibonacci support and make a great platform for a bounce. If gold falls faster, lower support comes into play.
When that happens, we’ll buy more great stocks on the cheap. Because a big rally is coming.
A friend of mine in the financial business, one of the best stock analysts I’ve ever met, called it “holding a dance contest on the edge of a volcano.” It’s like you’re in this crazy dance contest. The prize is $10 million. The hard part is it’s being held over a pit of boiling lava. Many people will quit. In fact, you’re counting on them to quit. Meanwhile, you keep dancing, because every step brings you closer to the prize.
Why am I so sure a big rally is coming? Because the underlying fundamentals haven’t changed at all.
Those “underlying fundamentals” include a rapid deterioration in the perception of U.S. institutions, from within the country and from outside as well.
Sean has prepared a fascinating presentation where he makes the case for moving a portion of your money to precious metals as we head into what might be the most volatile presidential election since 1860.
Be sure to watch it now, because we’re taking it offline tonight.
As Sean noted on Sept. 26, “In the short term, the dollar is going higher, and gold is going lower. This should end soon. A lot of weak hands are getting shaken out right now. We’ll use that to our advantage. When the correction does end, we’ll buy more gold and silver miners at cheaper prices.”
All the best,
David Dittman
