GODL! Precious Metal Soars Above $2,400 After Sudden Gap Higher
BY TYLER DURDEN
FRIDAY, APR 12, 2024 - 11:26 AM
Crypto bulls - at least those who didn't betray their "laser eyes" PFP and sell previously - have had their day in the sun for the past 3 months as bitcoin and most other digital fiat alternatives soared, making it clear why, despite the difficult, it can be so very profitable to HODL, especially with the US is approaching the Minsky Moment of issuing $1 trillion in debt every 100 days, and interest on US debt, now at $1.1 trillion, is set to surpass Social Security spending and become the single largest government outlay before the end of the year.
And now, it's time for GODL!
And yet, starting in the beginning of March, gold finally broke out from the black hole gravitational attraction of the Bank of International Settlements trading desk, and has soared some $300 dollars in just 6 weeks, its fastest ascent in decades.
Fast forward to tonight when, with most other assets quiet, gold suddenly surged higher, and after closing at an all time high, the precious metals spiked by another $15 in a matter of seconds, a move which for the otherwise hyperlethargic assets, is the equivalent of turbo boost.
And while it's now just a matter of hours if not minutes, before spot rises above $2,400, gold futures are already there: the active, June contract just hit a new all time high of $2,406.9 moments ago around the time Chinese buy orders started rolling in...
proposed last week by none other than BofA CIO Michael Hartnett, who in his latest Flow Show report noted that investors are looking beyond the "here and now", realizing that there is no way markets or the economy can sustain 5% nominal and 2% real rates, and are hedging two things: i) the risk that the Fed cuts as CPI accelerates, and ii) and more ominously, the "endgame of Fed Interest Cost Control ("ICC"), Yield Curve Control (YCC) and QE to backstop US government spending."
In short, something big is about to break, and if the surge in gold leads to a spike in yields, start the countdown to one of two things: i) QE and/or ii) YCC, because if the bond market sniffs out the endgame that gold is currently smelling, it will be up to Powell to once again prevent a catastrophic financial collapse.
For those wondering how far gold can rise, we excerpt from the latest note from BofA commodities strategist Michael Widmer (available to professional subscribers), who writes that...
And here is UBS, predicting that the price of the precious metal could double from here (note also available to pro subs):
The recent move in gold reminds me of a famous quote: “There are decades where nothing happens, and there are weeks where decades happen.” Looking at history, gold price can stay in the doldrums for a long time but when it does breakout, the surge is usually fast and furious. In deciding whether to chase or fade the recent gold rally, it might be useful to draw some inspiration from past breakout episodes. Here I define a "breakout" to be when the gold prices move 10% above the previous historical peak.
Should history repeat itself, it is not too late to participate in the current gold rally. An investor with a two to three-year view could expect to see gold potentially double from here to more than $4,000. The take-profit signal is when real rates turn negative and when there is a full-blown recession. Today with real rate still high and a recession seemingly faraway, it is too early to call the end of the ongoing gold rally. Gold breakout can be seen as an ominous signal, and it is not difficult to imagine a range of geopolitical risk scenarios. As for markets, many things look mispriced today with a two to three-year lookout, ranging from incredibly low credit spreads, elevated equity valuation to subdued volatility. It's fair to say that the gold market has fired its warning shot.
