Gold & The Coming Paradigm Shift: What’s Love Got to Do with It?

On a recent drive back to Baltimore, an old song popped up on the radio I hadn’t heard in years.

It’s a song that brought to mind the current market sentiment in the gold sector.

The song was “What’s Love Got To Do With It,” by Tina Turner.

And the lyrics go something like this…

What’s love got to do, got to do with it 

What’s love but a second hand emotion 

What’s love got to do, got to do with it 

Who needs a heart when a heart can be broken

The reason that song so resonated with me is because I can’t think of a single sector in the market today that’s broken more hearts than gold…

As each and every rally over the last six years has turned into a false breakout, quickly rolling over and taking back most, if not all, of investors’ gains.

Gold Chart 1

And even with this rally, where gold has finally broken out above resistance and pounded through not just $1,400, but $1,500 an ounce…

There’s still broad disbelief and skepticism as gold stocks are significantly trailing this move in gold, resulting in a massive valuation gap (read: opportunity) between the gold price and the HUI Gold Bugs Index of mining stocks.

Gold Chart 2

Which brings us to the question of the day…

How do you know when the bottom is in, and the real breakout rally has finally arrived?

In my opinion, no one has identified that environment better than Don Coxe, an “OG” gold bug who’s been at the epicenter of every gold and commodity cycle since the early 1970s.

Here’s my favorite Don Coxe quote on how to identify a market bottom and the environment from which all great rallies are ultimately born.

It’s short, sweet and simple.

Just 23 words.

And in my opinion, no one has ever said it better…

“The best investment opportunities come from an asset class where those who know it best, love it least, because they’ve been disappointed most.

And that dear reader, explains why so many investors remain skeptical and on the sidelines of a rally that is not merely entering what many believe is the perfect storm for gold…

But an environment where the price of gold may soon be propelled to new all-time highs by what hedge fund icon Ray Dalio is calling a coming “Paradigm Shift.”

The good news is this…

By nearly any measure, gold stocks are still historically cheap when compared to the price of gold.

So if you’ve missed this move, what do you do?

First, relax…

The precious metals mining stocks are still dirt cheap.

And if this move is the real deal (which I believe it is), we’re still in the early innings.

Be patient.

Don’t chase breakouts.

Enter on weakness.

And for options traders, selling puts is a great entry strategy here.

Bottom line…

While the pullbacks will surely come, the underlying fundamentals for the shiny yellow temptress couldn’t be brighter.

All she needs is a little love…

And this time, the broken hearts will be from those left behind.


Marty Robinson
For Whiskey & Gunpowder

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