Gold ingots and coins
If you look at a chart of a financial instrument and it doesn’t suggest a trend, then perhaps – and most likely – it doesn’t have one. Markets only trend when they are imperfect or at a rate where the profit to be had is pretty much the same as what you can earn from a ‘riskless’ government bond. When they trend with more implied return than that, something else is going on, and it is either an illusion or something worth backing.
Now look at this chart. What do you see?
What do you see in this gold chart?
Well I see this:
The gold chart showing how the price could rocket
This sort of chart is not rare; it is the sort of price performance that repeats itself time and time again. It occurs when there is a significant reason for a repricing event. It is the shape of most booms and bubbles, and it normally ends in a bust. However, it doesn’t have to bust if the boom period is long enough or the reason for the rise is big enough.
The reason for gold’s ride is geopolitical, and it will continue along this route if, in the coming years, the US and China cannot come to an accommodation. If these superpowers can work it out, then this will not happen, but if they can’t, then gold will continue to grind up, and soon the rest of the world and its speculators will jump on board.
Gold will give us all a reading on global tension and, as such, will be a leading indicator for many other investments. Even if you are a heavy precious metals investor, seeing gold skyrocket might not be the best outcome. However, will be a powerful tool to help us understand where we should be allocating our capital, because not all industries will thrive with spiraling global tension, and many businesses will be significantly impacted if tensions escalate.
The future is going to be volatile, and the above charts will act as a road map to show how close geopolitics is pushing us to the edge. In a way, I hope this trend breaks sooner than later.
Disclaimer: I have gold in my portfolio.
