The reason for the rally, of course, was Israel’s forces massing for an invasion of Gaza. No one wanted to be out of the gold market going into the weekend. It was a classic safe-haven event.
So, bad news for the world and, in a typical bittersweet fashion, good news for gold bulls.
Now, while all of us who have portfolios packed with metals and mining shares are happy to see these rising prices, whatever the reason, there is risk ahead. And that’s precisely because of the reason for this rally.
As experienced investors in the sector know well, gold typically spikes on these kinds of geopolitical events, only to fall right back down (or lower) once things calm down.
But as I noted recently, there is a chance that this time is different. The Federal Reserve’s rate-hike cycle is either peaking or has already peaked. Chairman Jay Powell & Co. would be happy to have an excuse to lay off further hikes, or even pivot.
And this crisis in the Mideast, which is very likely to escalate and expand, could be just the excuse they need. In short, if this geopolitical event forces a shift in monetary policy, it will provide the fuel to take this rally in the metals far, far higher.
That’s the bottom line: With so much at stake in the weeks just ahead...with such great opportunities accompanied by such massive risk...we have to prepare for any scenario.