Gold Consolidates-Respect the Trend

Gold has reached a milestone in 2024 as the bull market celebrates its silver anniversary. Twenty-five years ago, in 1999, the precious metal fell to a significant $252.50 per ounce bottom.

The United Kingdom, the hub of the international gold market, decided that gold was a relic and sold half of its reserves. The auction of the U.K.’s national treasure around the turn of this century drove gold prices to the 1999 low. Gold has rallied over the past quarter of a century, making higher lows and higher highs in a bullish trend that continues in early 2024, with prices over eight times higher above $2,050 per ounce on the April COMEX futures contract.

Gold is a hybrid asset. As a metal, it is a commodity with industrial applications. Meanwhile, gold has been a means of exchange or currency for thousands of years. Central banks validated gold’s role in the international financial system as they own the metal as an integral part of foreign currency reserves. Over the past years, central banks, governments, and monetary authorities have been net gold buyers.

In early 2024, gold remains a compelling asset that should be part of any diversified investment portfolio. Gold is a rare metal that has captivated humans since prehistoric times. The Bible’s Old Testament mentions gold 417 times.

Gold made new highs over the past decades

• Gold surpassed the 1980 $875 high in January 2008.
• Gold moved over $1,000 per ounce for the first time in January 2008.
• Gold made higher highs in 2009, 2010, 2011, 2020, 2021, 2022, and 2023.

 Corrections were buying opportunities

• Gold experienced significant downside corrections in 2008, 2012-2015, 2020-2021, 2022, and 2023.
• Each correction led to a new record high.
• Buying gold on a scale-down basis during corrections was the optimal investment approach.

 The trend is your friend

• A trend is the path of least resistance of an asset’s price.
• Trends reflect the market’s sentiment.
• Sentiment demonstrates the market’s collective wisdom.
• Gold’s trend has been bullish for twenty-five years.

 The reasons for higher gold prices in 2024

• S. interest rates have stabilized.
• The Fed has shifted to a more dovish monetary policy approach- Lower rates tend to support higher gold prices.
• The geopolitical landscape is a hornet’s nest of potential conflicts.
• The increasing potential of a BRICS currency with gold backing could increase gold’s role in the international financial system.
• Gold is a haven during geopolitical turmoil.
• Gold’s trend supports higher highs.

 The assets that will follow gold higher and lower

• The physical gold bars and coins are the most direct route for gold ownership.
• The leading ETF products holding physical gold bullion are GLD, IAU, and BAR.
• Gold mining shares tend to move higher with gold prices. GDX and GDXJ are the top diversified senior and junior gold mining ETFs, owning shares in the leading senior and junior gold mining companies.
• A diversified portfolio that owns stocks, bonds, and alternative assets should include gold, the world’s longest-standing asset that enhances wealth.

 Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!