Navigating the Golden Opportunity: Insights into Long-Term Investments in Gold

We could talk about the S&P 500, the Nasdaq and stocks, but I think that I said everything that needed to be said earlier this week.

Stocks are going to continue higher this week simply because there’s nothing to derail that trend.  I positioned it as Newton’s First Law of Motion Effect.  We’ll check back in on stocks on Monday.

For today, there’s another area of the market that I don’t see as a trade.  Instead, I see it more as a long-term opportunity.

It’s an area of the market that’s been through a tough time over the last few months as uncertainty over the Middle East and other energy related

This morning we’re looking at investments in the commodities market, namely Gold.  Next week, we’re talking Silver and then Uranium the week following.

Let’s jump into gold right now.

The Goldbugs, including myself, have been touting the long-term bullish trend in Gold and its target of $5,000.  That’s right, $5,000.

Now, I think about that.  The continuous contract for gold sits at $2,350 this morning, off its highs in April of $2,400.  Since March, gold has added 18% to its value and that’s on the back of two things.  Uncertainty in the Middle East and inflation.  That’s it.

Now, I once had a professor tell me that he was going to get rich from buying and holding gold.  I’m sorry to say, that’s not the way that it works with gold except once every 20 years or so.  Most of the time, gold trades in a range.

But this IS one of those times that it will pay to hold gold for the next year.

We are headed into an even more uncertain period for our country and the world.  Inflation is pushing towards stagflation, geopolitical fears at their highest in perhaps the last 50 years.

The World’s Central Banks understand that.  Over the last two years, we’ve watched central banks around the world hoard gold beyond historical highs.

Add to that the Main Street investors, buying coins at Costco, their neighborhood coin stores or online.

This all adds up to a long-term trend that you don’t try to time, you just ride for the next 20-50%.

Last week we saw gold drop 5% in a matter of days.  That was a little de-risking ahead of the Fed.  It gave the long-term gold bugs a chance to buy into the long-term market at a discount.

Here’s what I see from here.

Gold is currently battling $2,350 with a strong tailwind starting to blow from its 50-day moving average.  That friendly trend is preparing to break Gold above that resistance and start the next 20% rally.

Gold Chart

The charts look like what we saw in February as Gold broke through $2,100 and didn’t look back.  That was a 17% move.

Here’s how I participated in the breakout.

Don’t run to Costco’s website to buy your gold.  Instead, open your broker’s website and buy the SPDR Gold ETF (GLD) shares.

This exchange traded fund allows you to buy and hold gold in your brokerage accounts with the convenience of daily market pricing and no extra fees when you decide that you want to sell your gold holding.

GLD price chart

A bonus.  Those of you that trade options may want to think about looking at the long-term options on gold.

I recently started using LEAPS on the GLD shares to help diversify my commodities holdings while adding a long-term leverage component to my positions.

Those of you looking to do the same may want to consider the January 17, 2025, $220 GLD calls which trade around $1,365 per contract.  A rally to $250 before the November elections would result in this option price at $3,425 per contract, a 150% gain.

As always, make sure that you exercise proper loss control based on your individual risk parameters.