Gold Bull Says Don’t Buy Gold…Yet
There’s no queue out the door, but don’t let that fool you…
I’ll guarantee you that inside every bullion dealer across Australia, a frantic team is trying to take phone calls and respond to emails.
When the gold price makes 12 new daily highs over 14 trading days, then it’s pretty much tools down and pick up the phone.
That’s everyone. Sales staff, marketing, admin, back office staff, traders, and CEOs.
That’s how enormous the volume is.
There’s a mad rush from investors to get their hands on the precious metal.
But, what if you just wait it out a little bit?
Place your order for bullion in a few weeks from now, rather than today?
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New high after new high…
Gold going up in a straight line is exciting, isn’t it?
I mean, here is this pet rock, something for cranks and crooks, running to highs few thought possible back in 2015.
For the number nerds out there, gold is now almost double its December 2015 low of US$1,047.
While we were sleeping gold spiked to US$2,055. Although it’s dropped back to US$2,038.
Nonetheless, this price surge will see even more investors rush and scoop up the metal.
There’s no longer a doubt gold is in a bull market.
What began at the tail end of 2015 is now a firmly established uptrend.
However, that doesn’t mean the peak is here. Not even close.
The monetary experiment we’ve been stuck in for the past 50 years is approaching the death rattle, and the long-term rally ahead is reflecting the declining faith in the US dollar.
While the 12% price rally in the past month seems to come out of nowhere, these incredible rallies are really quite common for the yellow metal.
A cursory look at a price chart will show that equivalent ‘out of nowhere’ rallies have happened before.
Let’s take 2005 and 2006, for example.
There was an impressive 15% jump in the yellow metal from mid-November to mid-December in 2005. Rising from US$460 to US$527 in a little over four weeks.
Granted, a US$70 leap doesn’t look as good in the headlines.
Four months later there was a similar ‘surprise’ 21% jump, where gold soared from US$593 per ounce to US$730 per ounce.
I picked both of these rallies, because around 2005 and 2006 the yellow metal really began picking up mainstream interest.
Not only were more people interested in buying physical bullion. But gold-backed exchange traded funds were rapidly increasing their gold under management.
But here’s the thing you need to know about both of those rallies.
Shortly after those new all-time highs, the US dollar price of gold fell.
Check this out:
US dollar gold price
Source: Trading View
The problem with all these new seemingly out of nowhere highs, is that it makes you want to buy more gold just because it’s rallying.
I’m not cherry-picking data to make a point either.
From 2006 to 2011 spot gold went on to have several massive rallies — carving out numerous ‘all-time highs’ along the way — all the way up to the peak.
And after almost every single straight line rally up, was a fall of near equal proportions…
If gold is in the headlines, it’s not the day to buy it.
History is likely to repeat
I started out in the markets in March 2007.
In the years before that I was in the lending and finance game. A peddler of debt, if you will.
Long-time readers of The Daily Reckoning Australia will know I’ve been into gold since my teens.
However, once I officially started in the ‘markets’ many a friend would ask me what the hot tip was.
‘Go on, where should I stick my money?’ was a question I heard regularly.
For starters, it’s rather ironic that I began my stock market career around the same time the murmurings of the great financial crisis began.
Furthermore, my answer to people back then was snorted at.
‘Gold,’ I’d say, ‘The physical stuff though,’ was my answer every single time. I remember saying that gold was going to be US$1,000 at some point in future. Not that I knew when.
Back then, no one listened. They didn’t buy physical gold. A couple of my mates may have put money into a gold-backed ETF, but that’s it.
But that’s pretty much the last conversation I had with them about it. At that point in time the XJO was hot and to them I was clearly stupid.
Instead the unravelling market panic rocked their faith in the markets, and as gold rallied to its peak over 2010 and 2011, they decided perhaps an ounce or two was a good idea.
Consider today’s all-time high as reminder to buy gold soon, but not the reason today.
After a spike the price falls, and that’s when you should call your bullion dealer.
You’ll get the chance to buy gold at a lower price. You just need to be patient.
Those new highs the market is getting all excited about are just a clue there are even bigger ones ahead.
But history says you’ll be able to get gold cheaper if you wait a few weeks for the rally to die off.
Editor, The Daily Reckoning Australia