We have been calling for much higher gold since December 2017, however, we have been reluctant to put a hard and fast number to the rise. We have pointed to 2020-2021 as the time frame for gold to truly break out and begin reasserting itself in the global monetary markets. What we have focused on is the average annual high set in 2011 of $1,670. We believe gold is going to breach this number by a significant amount beginning in 2021 but the initial rise will take place in 2020.
Now we learn there is even more support for this idea, as if the collapse in mining production is not enough, but now someone has “placed a bet” of 5,000 contracts on the COMEX for June 2021 that gold will reach $4,000 an ounce.
The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.
Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.
“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.
Gold futures climbed to a record $1,923.70 an ounce in 2011 as the Federal Reserve bought over $2 trillion of debt to stimulate the U.S. economy. While bullion has rallied 14% this year, the precious metal is still 24% below the current all-time high. Source
Once you combine this bet, which is one individual and therefore doesn’t really mean anything, but if you combine this idea with the reality of what is happening in the economy, geopolitical issues and the general uneasiness of our world, gold should be able to break out of the shackles and move to these loftier heights. It’s not out of the question as we have been pointing out for the past two years, mining supplies are collapsing and as we discussed earlier this year the mergers by the top gold mining operations is not a good sign and now we have further confirmation by one of the major gold mining operations.
- Agnico Eagle Mines CEO Sean Boyd says there won’t be a “substantial” number of gold mines built in the coming years.
- “It’s getting much tougher to grow reserves. It’s getting much tougher to grow production,” Boyd tells Jim Cramer.
- Boyd attributes it to increased lead time from additional permitting, as well as geographic difficulties.
“Still very strong demand coming out of central banks, coming out of regions like China and India,” he said. “It’s getting much tougher to grow reserves. It’s getting much tougher to grow production, not just grow production but grow it in a way that actually improves the underlying quality of the business.”
Even so, “I think that bodes well — even if gold is at $2,000, we’re not going to see a substantial amount of new mine supply because it’s just so difficult,” he said. Source
We have been saying that once gold leaves a particular level, like $1,200 gold, that it would never, ever revisit that level again. Barring some unforeseen major change we believe this is the case. If gold holds through year end above the $1,300’s we believe that level will be history as well. Gold could dip into the $1,300’s but it would be short lived and then the tract higher will be in earnest.
