Is it time to double down and buy gold now?
People have treasured gold since the dawn of recorded history, both for its usefulness in jewelry and other practical applications and for its role as a store of value and foundation for tradable currency. Even as the end of the gold standard greatly diminished the yellow metal’s role in global commerce, it nevertheless remains a go-to safe-haven asset during times of trouble.
Gold prices have been on the uptick and recently, the metal pushed above the key $1,500-per-ounce mark. That was the first time in more than six years that gold had been that expensive, and with a performance that eclipses even strong stock market returns so far this year, the move has investors paying close attention.
So, is It time to buy gold? As always, the financial media is starting to guide the public towards Gold. Now… within a few months of a top! Sure, it still has room to move higher to test the top of the channel in the 1589 level. However, this still seems poised to make a high in September and the reasons seem obvious.
The #1 Reasons Gold Tops Soon
Buy the rumor, sell the news. This does seem a bit similar to 1975 when everyone was expecting gold to rally to $500 from $200 because “Americans” were now going to be able to buy gold. The Europeans, realizing the “Americans” were soon going to buy gold, bought gold at $200 and it promptly collapsed back to $100 going into 1976. It then rallied into 1980 reaching $875.
Now we have the fourth Central Bank Gold Agreement, signed by the European Central Bank and 21 other national central banks, is due to expire on September 26, 2019, this year, and the hype is that the central banks of Europe will start buying gold to compete with Russia and China. The CBGA is a formal agreement between banks to prevent uncoordinated sales of gold bullion en masse. The bulk of their selling took place in 1999-2000 and they virtually stop selling gold after 2011.
This is all hype that the central banks will suddenly begin buying in mass. It should be pointed out that the agreement was only about sales – NOT purchases. If they wanted to buy gold they could have been doing that at any time. Those who claim after September 26th they will be free to buy gold really need to read the agreement for it ONLY sought to coordinate sales – not purchases.
World Gold Council data shows that central banks, as of 2018, held 33,200 tonnes of gold bullion – almost 20% of the gold ever mined. The WGC also reported that 2018 was a record year for buying; the 651.5 tonnes bought was a 4% increase in 2017 and the largest amount bought for 50 years. However, China and Russia have been buying simply to reduce exposure to Western currencies in general.
The #2 Reason Gold Tops Soon
The public is always late to the party. More importantly, as always, the public trades emotionally so they miss gains and capture losses.
As you see in the Weekly members area Gold Trading Chart, we have already captured most of the gains and are preparing to exit and find the next place for profits.