What’s the name of that popular precious metal again? You know, the one that humans have fought and died for over millennia? The one with a limited world supply that could be contained in two Olympic-sized swimming pools and that many investors gobble up as safe investments? Oh yeah! GOLD! That’s it!
Mankind has had a love affair with gold for millennia. Although it is estimated by the US Geological Survey (usgs.gov) that 244,000 metric tons of gold have been recovered to date and with approximately 3,000 tons of new gold mined each year, to be clear the supply is limited. Demand is high and will only get higher as the world’s population increases by over 1% per year.
To be fair, gold has been a dark horse for awhile. It hasn’t been occupying much media space since Covid-19 graced the scene.
But…stealthily….gold has been on the rise for months now.
Ever since the shine started to wear off the bitcoin bubble, that speculative cash has been pouring quietly back into safe havens.
And now is the perfect time for all you gold bugs to get a piece….
The Inverse Relationship Between Crypto and Gold Is As Clear As “X Marks The Spot”
Gold has had a long slide downward before its fortunes quietly changed.
Here is an overlayed chart of the SPDR Gold Trust ETF (NYSE: GLD) and the S&P 500 Index (SPX). Gold along with the stock market came crashing down in Q1 of last year when the global Covid-19 pandemic threatened life on this planet as we knew it. The bottom was hit in March of 2020 as both gold and the S&P 500 rose from the ashes like a Phoenix.
In early August, gold topped out and began a 7-month slide while the S&P 500 just kept on keeping on. It’s not surprising that the stock market continued to rise given the trillions of US government dollars being pumped into the economy in stimulus.
The markets had already risen dramatically and with extra money in their pockets and Fear of Missing Out (FOMO) kicking into high gear, money poured into “risk on” assets like stocks and presumably out of “risk off”, safer assets like gold.
Now, there was something else afoot during the movement out of gold. Yes, that’s right… BITCOIN (and other cryptos)!
Check out the overlayed chart below on GLD and Bitcoin (BTC). On August 7, 2020 when gold topped out, BTC was trading at $11,645. Cryptocurrencies like Bitcoin dominated the news like Dot.Com stocks in the late 90s. Investors gobbled up crypto in a veritable feeding frenzy. Money flowed out of gold with a whooshing sound and into BTC and other cryptos.
BTC hit an all-time high of $65,520 on April 13, 2021. Gold dropped from an all-time high of $2,089.20 an ounce to as low as $1,673.20 during the same period.
Since topping out, BTC tanked 45% to as low as $30,205 in a virtual fire sale. $Billions flowed out of BTC and into gold. During this time, the
SPDR Gold ETF (NYSE: GLD) has been steadily rising. In fact, GLD has risen 13.8% from $157.13 to a high of $178.85 over the past 3 months.
It’s pretty clear that gold has been on a stealth roll – and I don’t see that changing anytime soon.
Three Reasons Why Gold Will Keep Going Up From Here (And How to Play It)
- The S&P 500 has risen 93% from Covid-19 lows of $2,191.86 to recent all-time highs $4,238.04 in just over a year. Investors are sitting on a lot of profits and the S&P 500 is stalling out. The markets are toppy, and a single piece of negative news could set off a flight to safety (gold).
- Billions of dollars are flowing out of crypto currencies like Bitcoin. It’s clearly shown in the chart above. BTC has dropped about 45% over the past 2 months and poised for further downside driving more investors into safe haven assets like gold.
- Goldman Sachs forecasts the price of gold to reach $2,300 an ounce in 2021. It is currently trading around $1,900 an ounce.
There are a handful of great ways to profit on gold.
- Invest in gold for your long-term holdings.
- Buy gold futures (GC) to leverage higher gains (and magnify any losses).
- Reduce your cost with the SPDR Gold ETF (NYSE: GLD). This stock tracks physical gold and even has options.
Talk soon,
Tom
