Stewart Thomson | Jan 09, 2024 02:31PM ET
From a liquidity flow perspective, this year is off to a fabulous start for gold bugs of the world.
The concern was that analysts and hedge funds were betting gold would fall below $1000/oz. In contrast, I noted the tiny hedge fund exposure to commodities and issued a number of buy alerts for gold, silver, and an array of miners. What happened next? Most miners promptly surged 100%-300% higher.
Today, the situation is like 2015; after charging into gold and commodities around the 2020 high, hedge funds have steadily reduced their positions.
I’m also getting fresh “oil could fall” and “gold could fall” emails of concern from amateur investors. This tends to happen right before there are rocket launches for commodities and gold!
Also, the first week of trading for the US stock market was negative. That’s usually a sign that the entire year will not be good.
Tactics? My rough rule of thumb is that there should be a 20% price sale in play for the Dow before investors consider allocating capital into the US stock market. Currently, I would not be willing to buy US stocks unless there’s at least a 10,000 point drop in the Dow.
What about gold? Well, gold is not a hot stock for investors to flip for fiat profits. It’s not a business deal either, but it is the ultimate currency.
While the stock market looks set to tumble like it did in 1966 and 1929, gold looks ready to rally into the summer just like it did in 2016. There might be another week or so of consolidation, but after that, it’s likely “space helmets on” time for the metals and mines!
I’ve suggested that stock market investors should look for 20% price sales in the Dow before buying, but what about gold?
Well, because gold is a currency (and the best one), it can be bought more often than the stock market. A good rule of thumb for gold is that 5% price sales (about $100/oz) are to be bought.
What about the sell side? Gold can be exchanged for land but not much else. Gold is the ultimate currency and land is the ultimate asset. It’s that simple. Fiat schemes (buying the stock market, oil, crypto, miners, etc) should be used to get more fiat, and then that fiat should be parlayed into land and gold.
I’m an aggressive buyer of gold, silver, and mining stocks at $1975, $1930, and $1810. At all these prices, I would expect significant Asian physical market demand to also come into play.
That demand tends to trigger aggressive commercial trader buying on the COMEX and LBMA, which are arguably the two main gold price discovery markets of the world.
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