“Let’s Do It Again”
-The Beach Boys
Investors remain complacent and almost oblivious to one of the oldest, biggest risks: war.
The market has rallied in November backstopped by the idea that the Middle East conflict is contained.
Things were said to be “contained” before the Great Financial Crisis in 2007-2009.
Financial market participants paid no heed to the looming catastrophe of the first world war.
During the first eight months of 1914 (before trading was halted for the year) the UK bond maket rose by 4%.
When trading resumed in early 1915, they gapped down and proceeded to lose 41% over the subsequent 6 years.
This is what happened to the blue-chip financial assets of the winner. German bond investors were effectively wiped out.
These geopolitical risks overlay the brewing radical, systemic, socioeconomic shifts that are emerging as the seemingly comfortable, history-blind societies wrestle with challenging demographics (baby boomers retiring), the need to rebuild their underlying energy systems and allocating the losses that are festering beneath the surface during a 40 year debt bonanza.
Preserving your savings over the coming decades will be paramount.
The return of capital versus the return on capital will be key.
Gold will be in favor as the dollar loses purchasing power.
Gold completed a powerful initial surge in October, with GLD running from 168 to 186.
In so doing, GLD left a large range outside up monthly bar in October.
The last time GLD left a large range outside up month from near its 50 month moving average was off the November 2022 impulse.
GLD continued higher for another 5 months.
In sum, the advance went from 150 to 191.
If the current move mirrors that momentum, it points to 208 and breaks GLD out with authority over triple tops.
This recent pullback is pulling back the rubber band in a wave 2 consolidation.
With a wave 3 on deck with GLD so close to a breakout, fireworks are expected as the point of recognition becomes undeniable.
Note the parallels from OCTOBER 2008 when gold shook out before exploding.
GLD corrected 7 months in 2008 (versus the recent 6 month correction from May 2023) prior to tripling.
GLD struck a low of 66 in October 2008 rallying to 185 in August/September 2011.
A move of 990 degrees.
A similar move over the coming 3 years mirroring the 2008-2011 stampede equates to 315 GLD in 2025 (3 years from the 2022 major low).
Interestingly 2025 is 45 years from the major top in 1980.
This is a big Gann cycle, half the Great 90 Year Cycle.
A month ago surveys showed disdain for gold.
I received sarcastic tweets about “another breakout buyer, can’t wait for this easy short.”
I suspect the breakout will initially be met by more skepticism with most players grateful for the opportunity to get even with their purchases from 3 years ago.