My call last week that gold was reaching a big turning point was right on target.

Unfortunately, the metal turned in the wrong direction.

September 23, 2020

Dear John,

I was right, and wrong, in last week’s prediction on gold’s short-term future.

I’d predicted that gold’s ever-narrowing trading range was portending an imminent breakout, and that usually such a breakout occurs in the same direction as the previous trend. Thus, gold seemed ready to rally to the upside.

That prediction turned out to be half-right…as gold broke out, but to the downside.

And the sell-off has continued today, with gold down another $35 and silver off over 5%.

Consider what this action has done to the same chart I featured last week, but updated to include the subsequent trading action, plus a line added in red to indicate what’s happened so far today:

As you can see, my prediction last week was right on target for a day or two as gold broke to the upside, but that break out quickly morphed into a break down. And the story was much worse for silver which, as I’ve often warned, also provides leverage to the downside. It’s been plummeting.

What led to the sell-off? A lot of factors, primarily the passing of Supreme Court Justice Ruth Bader Ginsburg and the political turmoil that event promises to spawn.

Secondarily, a steep rise in Covid-19 infections in the U.K. that threatens to bring about a new lockdown in that country is worrying the markets that second waves of the pandemic can, and perhaps will, visit every country.

But at bottom, asset prices had risen to worrisome levels, and a market that already has investors looking nervously over their collective shoulders doesn’t need much to go wrong to spook them into selling.

And so they did — tanking U.S. equities along with the metals, and sending the Dollar Index higher over the last few days in some sort of a weird safe-haven phenomenon.

I’ve noted in the past that gold doesn’t need a weak dollar to rise, but it certainly helps. On the flip side, a strong dollar doesn’t necessarily mean gold will fall, but it certainly provides a headwind. And right now, the dollar is blowing gold, silver — and even U.S. equities — backwards.

Focusing On The Big Picture

One of our readers admonished me in an email recently, advising that I should avoid making short-term predictions and stick to the big picture for the metals.

He’s right, of course, since this is precisely what I’m constantly advising readers to do themselves. The reality of producing publications focused on the metals and mining markets (including one with the word “Alert” in its title), as well as responding daily to media requests for commentary, means that it’s almost impossible to avoid talking about short-term events in some context.

Then again, there’s the time-tested market pundit adage to “give a date or a price, but never both,” because the market doesn’t care about your publishing pressures. It will eventually knock you upside the head with reality.

So what does this break-down instead of break-out mean in the big picture for gold? Consider the same chart as above, but with a one-year view instead of three-month span.

As you can see, yesterday’s sell-off is significant, but much less so when viewed from a perspective of where we’ve come so far in this latest leg of the gold bull market.

As far as where this correction will go, this chart also shows that we’ve fallen cleanly through the 50-day moving average, which indicates further weakness ahead. However, the 200-DMA, thanks to the steep rallies so far this year, sits much lower at around $1,719.

That target seems too far for me to envision at this point, and the low $1,800s is probably more likely as a bottom.

But back to the big picture where, from a fundamental standpoint, it’s difficult to imagine a backdrop more bullish for gold than the unrestrained money printing and debt creation currently in progress…and because of these debt burdens, the impossibility of positive real interest rates going forward.

That was a story obvious to all as of last week. After the last few trading sessions, there are more doubters in this marketplace — and perhaps that’s precisely what we needed.

By this point, you’ve gathered that I view this setback as a buying opportunity. I want to be patient, however, and see where the next few days takes us before making any specific recommendations.

So for Gold Newsletter subscribers, look to next week’s October issue for ideas on the best buys after this sell off. And for those who aren’t yet subscribers, CLICK HERE to join up for this buying opportunity.

Perhaps most importantly, take a look at the blockbuster speaker roster we’ve assembled for this year’s virtual version of the New Orleans Investment Conference, being held in just a few weeks, from October 14-17.

Not only will these speakers give you live, late-breaking guidance on where to invest in metals and mining during this event, they’ll also provide insights on the geopolitical scene, the prospects for the economy in the months ahead, and coverage of every other asset class.

And even past this intensely valuable, four-day event, we’re going to keep delivering the ongoing views of these and other experts to registrants for months following the event.

So CLICK HERE to get all the exciting details, many of which we’re just announcing now.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference