A Perfect Storm for Gold

As of the close business on August 14, 2019 your editor’s monthly average gold price chart (based on the London PM Fix) displayed an average price so far this month of $1,479.78. Clearly, we are in a profound new bull market for gold as evidenced by the last three months pulling up the longer-term averages. The 20-month average is $1,298.05 and the 40-month average is $1,281.15.

There is no doubt in my mind but that the global dollar-based monetary system is sick and very possibly in its waning days. That’s because the fiat monetary system has been destroying capital by disallowing price discovery of capital by manipulating interest rates way below equilibrium. The situation is serious enough to cause Michael Oliver to put out the following missive to his paid subscribers on August 13: “MSA does not function on “gut feel” or “tape reading.” However, we have to admit that the events of recent weeks have generated a sense of urgency that something big is about to unleash. We could be wrong, but here are our thoughts. 

Two specific events today prompted this report. First is the continued vertical action of the T-Bond futures and gold—in stark contrast to other major asset categories. T-Bond futures exploded two full points today. 30-yr. yield dropped from 2.26% to 2.14%. Ten-year yields dropped from 1.74% to 1.65%. Gold continued its uninterrupted surge. The other is the sharp drop in the commodity category (the Bloomberg Commodity Index, grains, soft commodities). We think there’s a linkage between these events that is/will be connected to a technical situation in the U.S. stock market. The same goes for stocks, but especially take time to view the fifteen-minute chart tour video (“Biggest Trade of the Century”) at www.OliverMSA.com We are sensing that events could be coalescing and might produce rapid outcomes rather than leisurely, trending outcomes.

Tired and fearful of the dollar, Bloomberg reports that “The Chinese continue to add gold to their reserves in an effort to reduce their exposure to the dollar.” The handwriting for the existing dollar-based monetary system is on the wall. Meantime, while this is all bad news, it’s the best of worlds for gold and gold shares. Our Model Portfolio has now surpassed gains by the S&P 500 and this is the most exciting time I have seen for junior exploration stocks which is why my focus in this month’s letter are on junior gold companies that have near term explosive share price growth from pending drill results.  Enjoy the ride!