Is it Time To Dump Gold Stocks?
Commodities / Gold and Silver Stocks 2020 Jul 15, 2020 - 12:40 PM GMTBy: Submissions
As a contrarian and long-term holder of Goldcorp. (now Newmont), the latest push higher in the price of gold begs the question: is now the time to sell? The concern, for the uninitiated, is that after the price of gold moves powerfully higher there is an uncanny tendency for forces to mysteriously align and push prices powerfully lower. These “forces” (excuse the conspiratorial flare), have been known to short paper gold contracts in seemingly unlimited quantities, and, according to some, with the implicit backing of the Federal Reserve…
Conspiracy or not, it is obvious that the paper-traded price of gold can have an impact on the physical price of gold and/or the sentiment of those that buy and sell precious metals. After all, just as “$1,800+ gold!” attracts attention, like it did today, so too can headlines like “COMEX gold suffers historic crash!”. In other words, while record inflows into gold ETFs this year are certainly noteworthy, the informed contrarian knows that record inflows can quickly lead to record outflows.
The paradox, if otherwise unclear, is that the central bank rigged financial system is a great reason to park some money in precious metals, yet gold is still, like it or not, a component of this rigged system. Is it possible that the entire financial system will remain rigged but gold will be permitted to roam freely? Is it really likely that gold, a direct competitor to fiat money, will win the war without “forces” even mounting a single attack? Suffice to say, when the record inflows into gold abate, there is the expectation that, akin to 2011, the price of gold will suffer a serious collapse. The question, in a word, is “when”.
So, is now the time to sell NEM and put this money to work somewhere else? My answer is that if your investment horizon is weeks or months, taking some money out of gold stocks may be a good idea. However, if your horizon is years or decades, selling a holding like NEM right now (as negative interest rates look set to be around for awhile), could be a big mistake. In short, if you are unable to tamp-down your contrarian spirit as the price of gold shoots higher and/or you fear some historic onslaught of mystery sellers backed by central banks arriving soon, buy some put options and bury them…because now is not the time to dump gold stocks.
By B Willett
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