This past week has given us the opportunity to witness a bit of volatility firsthand. With the tumultuous rhetoric late last week, followed by the calmer talk of this week, the markets have seen volatility that has been absent for some time. Precious metals, led by gold, experienced a nice move higher late last week as fears surrounding North Korean tensions dominated the news. Those same fears have abated now, and the price of gold has retreated with those fears.
Today's small decline to just above the $1270 level puts us right back at the same spot we were at before all the sound and fury of last week. So if we can look through the haze of the past week and dial back the noise, what can we learn from it all?
1. Volatility is not dead. Markets in general have been very muted, even sanguine, for an extended period, but that can change very quickly -- as we have witnessed.
2. Precious metals -- and in particular gold -- remain an important and valued safe haven asset in times of stress. Any type of major geopolitical stress or global financial uncertainty continues to drive investors into traditional safe assets, and gold is on the top of that list.
Many noted investors, from Ray Dalio to Jeffery Gundlach, have also highlighted the global uncertainty and market volatility of the past week. They have been outspoken in their belief that gold should be a significant asset held in any portfolio.
Technically, gold has failed to breach the $1300 level, once again. This leaves us mired in the trading range that gold has been stuck in since early spring. We continue to occupy the high end of the range as we approach September and October, which have traditionally been excellent months for gold investors. The COMEX net speculative position has more than doubled in the past several weeks, suggesting a pickup in sentiment and momentum.
We anticipate gold breaking through the $1300 level in early September and moving significantly higher from there.
With the summer slowly winding down, the next few weeks will be a good time to position a portfolio to take advantage of increased uncertainly and renewed volatility that should return to markets in the fall. The positive fundamentals underlying gold remain solidly in place. The past week has demonstrated that gold and silver are poised to take advantage of the volatility ahead.