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 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 and illusion or something worth backing.
Now look at this chart. What do you see?
Well I see this:
This sort of chart is not a rarity 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 normally ends in a bust. However, it doesn’t have to bust if the period of the boom spreads over a long enough time line or the reason for the rise is big enough.
The reason for Gold going on such a ride is geopolitical and it will go on this route if in the coming years the US and China can not come to an accommodation. If these super-powers can work it out, then this will not occur, but if they cant Gold will continue to grind up ad 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 metal investor, it won’t be such a great outcome to see Gold go through the roof, but it will be a powerful tool to help us know where we should be allocating our capital, because not all industries will thrive with spiralling global tension and many businesses will be much effected if tension get out of hand.
The future is going to be volatile and the above charts will act as a road map to how close to the edge geopolitics is pushing us. In a way I hope this trend breaks sooner than later.