In the last newsletter, we mentioned that gold was exhibiting a classic 'breakout' and 'consolidation' pattern. Typically, after such a strong upward movement following a multi-year struggle to maintain new highs, a market tends to consolidate at a new level. This pause often lasts several months and may include a 'retest' of the breakout range. Therefore, we wouldn't have been surprised if gold had briefly pulled back to the $2,100 range in a sharp, but brief, selloff. However, that has not occurred. In fact, we delayed releasing this newsletter by about a week to observe developments, as gold has now surged to new all-time highs in the $2,500 range.

In the June newsletter, we also stated, 'It is likely that geopolitical events combined with domestic political tensions will determine whether gold (and silver) makes a run to test new highs this summer or if we see volatility that will bring the price down to test support levels.' The fact that we have witnessed a multi-week rally to new highs indicates a fundamental shift, not just in the gold market, but in global markets as a whole. As we have previously mentioned, gold is less of a hedge against inflation today (especially with inflation trending downward at the moment) and more of insurance against geopolitical and financial risks (which are currently on the rise).

While new highs are favorable for those holding gold, they may be signaling something more concerning. The impact of the market shock from the unwinding of the Yen carry trade (see the article below) is only just beginning to be understood. While U.S. stocks have recently rebounded, we advise against interpreting this as an 'all clear' signal. The price of gold is clearly indicating otherwise.

This trend is somewhat reflected in the price of silver. It continues to 'do its thing,' lingering behind gold, partly because it is more commonly viewed as an industrial metal. However, when investors with a monetary focus step in, as they always do, silver tends to catch up quite rapidly. The $30 price level is now strong resistance. A strong move above could ignite a major rally in silver. Exactly when it will happen is uncertain, as silver has a way of keeping the market guessing.

Regarding the near-term price of metals, it wouldn't surprise us to see a pullback to the $2,400 range, or perhaps slightly lower. However, given the current strength, this is not guaranteed. We recommend that you continue to be prudent in how you buy your metals. Automatic accumulation on a schedule is a solid strategy for most investors. Those who monitor the markets closely can still buy on the dips. Either way, it's both smart and straightforward to keep accumulating your financial insurance.