Time seems to go by faster than ever with the pace of news events simply quickening. It was just three weeks ago that we saw an international crisis between the Trump administration and Iran with a targeted killing of one of their generals and their own counter rocket attack. The markets gyrated, but the price of gold made its latest peak on the evening of that Iran attack.
That price action brought with it a dip in gold, silver, and mining stocks that generated a lot of panic in the world of gold bugs. Some people were even calling for gold to plunge below $1500 with the idea that all bad international news is baked into the price and the crisis has passed. But one needs to stick with the charts and trends and not just focus on news events when it comes to navigating the financial markets.
Gold did not crash. What gold has done is now stabilize and is now consolidating. Pauses in a bull market are normal and that is exactly what is happening. The situation is similar to last year when gold went through $1400.
In July when gold went through $1400 it went sideways for about six weeks before moving higher again. A similar pattern seems to be playing out now. Gold appears to be forming support above $1525 to form a new consolidation trading range. What is clear is that the gold price crash callers are wrong. And silver also is showing a similar pattern.
The reality is that it is the value of the US dollar that is more important for gold and silver than news of international tensions. Never has an international news event created a new bull market or bear market in gold. It is the macro trends around the US dollar index and monetary policy that do. Some mining stocks are just going up already to new highs. Take a look for example at Franco-Nevada (NYSEARCA: FNV) for instance.
Gold giant FNV made a new high yesterday. If gold was going to crash it would be going down and not up. I own this stock. I also think that this consolidation range for the metals is also bringing a nice entry point for my favorite small cap silver stock.
-Mike
