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Is Gold Still Considered A Safe Haven Market?

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EDITOR'S NOTE: I’ll have to admit, the author’s use of Rudyard Kipling’s poem “If” interspersed with his gold commentary is insightful and creative, despite a tinge of cringe. Still, it makes an important point. The author’s personification of gold runs parallel to the investor’s messianic discouragement and faith. See gold for what it is, beyond that common wisdom that tends to freeze expectations and close minds. The author falls into the trap of following narratives surrounding gold that take away from the yellow metal’s more dynamic characteristics. Though gold has always been a safe haven, its correlations don’t always move in lockstep with inflation and other inter-market relations. Historically, gold is correlated with the sentiment surrounding the Federal Reserve. Another way to look at it: gold is a hedge against a failed Fed (whether this failure is real or perceived). And this sense of failure is likely to intensify, serving as a tailwind for the yellow metal in the coming months.

  • Historically, gold's role as one of the Kings of Commodities cannot be argued against.
  • It has long been viewed as a safe-have market and a leading indicator of inflation, a subject that has been in the news a great deal of late.
  • Yet there is also talk gold's time has come and gone, that it should no longer hold its royal title. I, of course, disagree.

Most Friday’s, at least when I remember, I take part in a gold survey conducted by my friend Neils Christnesen. Neils is an editor at Kitco News, and the survey is an informal poll of folks like me who have an opinion on anything market related. After receiving a friendly email from my friend early this morning, I pulled up the daily chart for August gold. Keep in mind gold is one of the Three Kings of Commodities (along with crude oil and corn), and as I looked at the solid sideways pattern the first thing I thought of was Rudyard Kipling’s poem “If”. For what it’s worth, it’s one of my favorite poems and one I’ve referenced numerous times in my analysis and commentary. 

This being a Friday, let’s allow our imaginations to wander as we think about gold. 

  • If you can keep your head when all about you are losing theirs, and blaming it on you,
    • The heated debate on inflation and rising interest rates continues to rage. As I discussed in a recent piece, this has historically included gold as a leading indicator of the commodity complex in general. Therefore, in times of inflation, rising prices were often laid at the feet of King Gold.
  • If you can wait and not be tired by waiting, or being lied about, don’t deal in lies,
    • A look at the August gold (GCQ22) daily chart, or even its weekly chart for that matter, shows the contract has bunkered itself in a sideways trading range between support at $1,806.10 and resistance at $1,861.50. Meanwhile, analysts and commentators continue to make up reasons “why” King Gold is going to make an explosive move one way or the other.
  • If you can meet with Triumph and Disaster and treat those two imposters just the same;
    • Gold has historically been considered a safe-haven market; one global investment traders have turned to in times of crises. Recently, the world has been filled with turmoil and disaster while gold sits still, out of the fray. This has led to the discussion of cryptocurrencies replacing gold on the world stage, something I find disturbing and comical at the same time.
  • If you can talk with crowds and keep your virtue, or walk with Kings – nor lose the common touch,
    • I return to the idea of Gold losing its identity as a global safe-haven market. It’s hard to imagine the chaos that would reign if it were replaced by Bitcoin, for example. It would be like Natural Gas, the famed Widow Maker, replacing Crude Oil as the King of the Energy Sector. (If needing comic reliefsee my recent piece on natural gas and bitcoin.)
  • Yours is the Earth and everything that’s in it, and – which is more – you’ll be a Man, my son!
    • Yes, gold comes from the earth. It can be seen, held, and weighed. It is not imaginary, created by algorithms pulling bits of data from an unseen cloud. Gold is gold. Its value understood by man(kind) since the dawn of civilization.

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Originally published on Barchart.

 

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