Gold Just Broke Out… but Where Are the Investors?

If you’ve been watching the red-hot gold and silver market, you know there’s lots to talk about.

Gold needed to show a full-blown breakout before generalist investors would flock to the market. Well, we seem to be there now… so where are they?

First, some background…

One of my big themes is that markets don’t care where the price of an asset is at the time, they care where it’s going.

In regard to gold, until very recently this is what generalists saw when they looked at the price chart:

In other words, they saw an asset that wasn’t going anywhere soon. In fact, gold seemed to have impenetrable resistance at a $30 trading range between $2,050 and $2,080.

As I put it in my Golden Opportunities issue on February 21st:

“…we need to prove that gold has truly broken out before we can expect those generalist, trend-following Western investors — who have been ignoring gold so far — to jump in.

In my opinion, that means we need to break decisively through $2,100 to show that the current move isn’t just another top and failed breakout.

Which brings me to the second piece of good news: That $2,100 level is within spitting distance. We could get there in a day’s trading, given the right circumstances.

And those circumstances seem directly ahead. While the markets are now arguing over when the Fed’s first rate cut will come and how many there will be this year, the big story is that we’ve progressed from the most severe hiking cycle in Fed history to a rate-cutting cycle.

That means we’re about to get a tremendous tailwind for gold, silver, mining stocks and “things” in general.

And that’s why this is truly a generational opportunity in junior mining stocks.”

Well, it actually took two day’s trading to get there, and now we’ve gotten there and beyond.

Where Now?

Last week, I presented the chart above and discussed my view that $2,100 was the next key level. At that time, I also hedged those views a bit, noting that maybe we needed to get to $2,150 before the generalists would take notice of gold.

I also stressed that gold had already bottomed, and a number of factors, including a collapse in open interest on COMEX, were predicting an imminent turn-around.

I didn’t know how imminent it would be — within minutes of finishing my mining conference presentation, the gold price began to skyrocket. By that afternoon, it was up $40. (And I was trying to figure out how I could take credit.)

Still, the many investors and junior mining execs that I talked to that day refused to let themselves get caught up in the moment. Wait until Monday, they rightly noted, and let’s see if Mr. Slammy has his way with the gold price.

It didn’t happen. Gold took off again on Monday, gaining another $30. And it added more yesterday and is taking off again today as I write. Let’s update that chart now and analyze what the generalists are seeing now….

Gold Continuous Contract Chart (March 5, 2024)

Granted, I’m biased…but that looks like a clear breakout to me.

Also, take note that the chart above tracks the continuous active contract price, not the spot price that I typically use. That said, gold’s up about $14 to $2,144 as I write, while the active April contract is at $2,153.

In other words, we’re essentially now at the $2,150 level that I was hoping for.

So where are the generalist investors?

It seems like they’re on the way. Open interest on Comex has jumped over the past few days and the GLD ETF has added to its holdings. These are the best proxies we have for U.S./Western gold demand.

If Western investors — who are typically trend-following — join the central banks and Chinese buyers in a big way, this new bull run in gold could be the most explosive we’ve seen since the late 1970s.

The good news is that it’s not too late to get on board.

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