Follow Gold and Silver Alerts Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
The tension between the bulls and the bears is really strong right now.
Stimulus hopes and fears, political chaos and certainty, coronavirus spikes and potential therapies - all of it is playing out in a huge battle royale that's had the VIX trading in a range between 27 and 29 all week.
My experience tells me that, in the long run, the bulls will win out. All the ingredients - like a shrinking supply of stocks and easy monetary policy, to name just two - are there for the run higher to continue, likely for years to come.
But for now, we've got to contend with volatility, and maximize every opportunity it offers. If you've been with me for a while, you'll know we're selective about where we invest in the calmest markets, but right now it's especially critical.
That's why I'm going to share my thinking on the yellow metal right now, and show you an easy buying strategy...
A Lot of Investors See Gold Differently Today
I'll be blunt: While gold is a fine protective investment, I'm not all that enthusiastic about it - usually. I tend to trade it only rarely, because it's not necessarily volatile enough to generate the kind of big, fast profits I like.
TOXIC STOCK ALERT: It's possible you may own some of the 22 million shares of this stock that change hands every day. Make sure you're nowhere near it. Click here...
It traded sideways for more than five years - five years in which stocks grew by the double digits annually.
But once in a while, a setup emerges that's just too juicy to resist, which speaks to our extremely selective approach to making money at the moment.
That's what's happening in gold right now. It's just "one of those times."
It makes sense; it's an asset people turn to in times of turmoil and uncertainty, and 2020 certainly checks all the boxes for turbulent uncertainty.
Gold's big run up actually started in July 2019. By the time the novel coronavirus pandemic exploded, it was already up 17% - with nowhere to go but up.
The spot price - the cash price per ounce - reached an all-time high of $2,075 back on Aug. 6. That's more than 6.5% higher than its previous record from August 2011.
There's a big difference today, though. Gold is still seen as a store of value and safe-haven asset, only today, a lot more investors see it in a different way...
What I mean is the pandemic brought millions of new, inexperienced "retail" investors or traders off the sidelines. They opened commission-free accounts and used mobile apps to trade stocks. At the same time, stocks and corporate paper were decimated, so all these new players bought beaten-down shares and gold. Sometimes, like in the case of Hertz Global Holdings Inc. (NYSE: HTZ), those stocks proved to be beaten-down for a good reason.
But gold of course did what gold usually does - at least for a little while.
HERE IT COMES: The hard truth about which stocks you should dump now and avoid, and which you should really consider buying. Watch now...
When stocks rolled over and fell out of bed on Sept. 3, however - a day after new all-time highs on the Nasdaq Composite and S&P 500 - lots of those new investors looked at their expansive gold holdings and saw not a shining, welcoming safe harbor of value... but another hot rock to drop; one more position to unload and take profits while the taking's good.
Stocks and gold kept falling. In gold's case, it went down to $1,857, or 10.25% off all-time highs, largely because so many investors now see gold as just another medium for speculation.
Whether that's an actual, long-term paradigm shift or "short-termism" playing out on a large scale doesn't really matter. Take a side, take your pick; it's a question for another day.
As I always say, don't fight the trend.
Gold is now in correction territory, and therein lies the opportunity.
See, there's a lot more to buying gold like this than simply buying on a dip because it's a dip.
We've seen gold go down for, shall we say, non-traditional reasons, but it still goes up for a lot of the same reasons it did back in our grandfathers' day.
We've got an election in less than a month; one that promises to be chaotic and drawn-out no matter what. We've got money-printing going 'round the clock, interest rates that are "lower for longer," the prospect of inflation ahead, and, maybe most importantly, millions more retail traders and investors likely to get back into gold because they see all the above "narratives" playing out.
What else are people going to do? Buy bonds? Not likely. The Fed's not going to raise interest rates for years; the real return on Treasuries is already negative when you subtract the inflation rate from the nominal yield on bill, note, and bond alike.
Here's How and Where to Buy Gold Now
It's like Bob Dylan said: "The slow one now will later be fast." All those new retail traders and investors - you know, the ones who were once duped by Wall Street - are in essence the tail wagging the dog.
They'll see these narratives, as I've enumerated them, and they're going to get back into gold, probably in a big way, and probably send it blowing past its August 2020 highs.
With all that said... who needs bullion? It's tricky to take care of, tricky to store, and it weighs a lot.
Why not take the easy money and buy the SPDR Gold Trust ETF (NYSEArca: GLD) to get exposure to surging gold prices that are surely coming perhaps as soon as this month.
Every share of GLD is backed by the real McCoy - physical 400-oz. London Good Delivery bars in a vault. GLD hit its all-time high of $194.45 on the same day the gold spot hit its all-time highs, and it fell 9.49% when gold fell 10.25.
In other words, it mostly moves in lock step with the yellow stuff.
Buy GLD at today's prices, and hang on to it as a long-term hold. I'd even buy it down to 10% below today's quote of $176.84. And I'd buy more if, as seems likely, equity markets have big short-term sell-offs and cross-asset selling.
And in the meantime, check out these stocks that I like better than GLD...
Over the next 30 minutes, I'm going to go over the 50 most important stocks everyone should know about. Some could be phenomenal winners - others I think should be avoided like the plague.
I'm going to name tickers, prices, and company names, so you'll want to take notes. Watch now...
Follow Money Morning on Facebook and Twitter.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.