Instead of trying to interpret each move, it would seem prudent to see Gold prices from the prism of long-term trends.
Gold prices etched a new milestone this week.
After bottoming in January 2016, gold’s uptrend began to trek upwards in August 2018. This upside momentum picked up speed in the middle of 2019 when the issues on the US financial system’s repo holdings surfaced.
The US government’s response to COVID-19 further accelerated this upside, which has turned almost vertical last week to break past September 2011 acme.
While the eyes of the public have fixated on the USD quotes, the record run in gold prices has signified a global phenomenon.
Or, surging gold prices have reached milestone highs against ALL fiat currencies, including the Philippine Peso, for the FIRST time since the end of the gold exchange standards, otherwise known as the Bretton Woods standards through the Nixon shock on August 15, 1971.
This unprecedented moment also suggests that while the actions of the US Federal Reserve and the Federal Government plays a significant role in the recent uptrend, global factors have likewise contributed materially.
Like all assets, gold prices operate in long-term cycles.
Since August 1971, gold’s run-up from $35 to $760 occurred in about 9-years. Of course, nothing goes in a straight line; there were countercyclical moves within the general trend.
After two decades of inertia, Gold prices bottomed in 2001-2002, which set the stage for the next ten-year uptrend, rising from about $260 to $1,794.
If history rhymes, gold’s recent breakout in USD, peso and other currencies will translate to a multi-year upside.
Or, if this uptrend of gold prices (in USD and peso) will at least resonate with the past, we should expect gold mining issues (here and abroad) to echo the ascent of its product.
The gold indices of the US HUI (NYSE Gold Bugs), XAU (Philadelphia Gold and Silver), and Barron’s Gold Mining recently surged to reflect the breakout of gold prices.
The chart of Philex shows how its prices behaved during the previous 10-year gold market. PX rose from about Php .15 per share to Php 26.55.
And for the first time, in recent years, prices of domestic gold mines appear to have diverged or decoupled from the mainstream issues to the upside.
So regardless of whether gold prices are about resurgent inflation or systemic credit deflation or escalating collateral issues of the offshore dollar system, a resumption of the gold’s uptrend will provide a safe-haven to your portfolio and or generate promising returns, without requiring substantial risk exposure.
And political obstacles have also diminished. Back in 2016, I predicted that the war on mines will end*.
Once the bubble economy begins to corrode and where prices of metals soar, such industry bullying will come to an end. Ban on mining will transform to welcome back mining!
From GMA (July 23, 2020): Allowing some mining companies earlier suspended or closed by the late former Environment Secretary Regina Lopez could help generate much-needed revenues for the government to respond to the COVID-19 crisis, a top official of the Department of Environment and Natural Resources (DENR) said….Environment Secretary Roy Cimatu, on Thursday, confirmed that some mining firms closed or suspended by Lopez in her controversial industry-wide environment audit would be allowed to resume operations after onsite inspections and reviews found that the miners have rectified their violations and complied with corrective measures.
Gold prices are presently overbought. Since no trend goes in a straight line, then profit-taking should be expected.
And this pause would present a timely window for entry points.
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