NFTRH+; Gold and War

A back and forth email string with a subscriber about war/politics and markets jogged me into a realization.

As you may know, over the years I have been cautious about gold at occasions when war, terror, pestilence and geopolitics are in the headlines as reasons to buy gold. As you do know (if you read NFTRH 779), I am currently guarded about gold to the extent that it is getting bid on war. That is because during the bull market of 2001 to 2011, far more often than not knee-jerk spikes in gold due to these factors were reversed into failure.

But I realized something this morning that I have not been accounting for. That is that said bull market began amid terror and war after 20 years in a bear market. On a more compact time frame, gold began a new bull cycle in 2019 when it took out the ‘1378 bull gateway’ we were managing at the time. But since the high in 2020 gold has gone a volatile sideways and in relation to the stock market has been in a bear phase. That’s a 3 year long bear phase.

My point is that I’d be much more cautious on gold due to the various wars going on now if it had already been bulling, with everybody on board the bull case. That is not the case, currently. I should have realized this in time to include it in yesterday’s report, but it slipped by me. 2001 was a time of great angst as gold bottomed amid that angst. This month gold tested its 2023 low amid geopolitical angst and war making.

It is sure to be volatile, but I want to insert this bullish caveat to a cautious view due to war.

That said, the technicals will guide and the fundamentals (especially for the miners, which leverage gold’s standing within the macro) will be tracked. So no functional changes. But the above is another factor to consider. War is not a reason to buy gold. At least it is not fundamental. Government/Fed war on sound fiscal and monetary practices is fundamental to gold.

The question now is whether or not the recent low was the low and the correlation to 2001 argues it may well have been. If gold (pulling back this morning) takes out the SMA 200 and the recent highs, it would have more credibility based on the above, as it has been an after thought at best, by a majority of market participants, since mid-2020.