Submitted by Stewart Thomson
I refer to gold bullion as “Queen Gold”, and the US T-bond as her secret agent James T. Bond. At some point, Sir James is going to outlive his usefulness to your queen, and a great bear market in bonds will unfold.
Specifically, I believe that the pressure put on all fiat currencies by the global tidal wave of QE, will make it appear that hyperinflation is a “done deal”. I don’t think you are going to experience full hyperinflation in this crisis, but you’ll get something very close to it.
As that happens, central banks around the world will likely begin raising rates aggressively, to combat the severe institutional loss of confidence in all fiat currencies. So, should you hold & buy gold now, or wait until 2015? The answer is that you should buy now.
1. In this super-crisis, central bank interest rate & quantitative easing (QE) policies have been the main drivers of the gold price. Many gold analysts and investors thought the bond market would crash, setting off a 1970s-style surge in gold stocks.
2. That hasn’t happened, because the US central bank is committed to maintaining low interest rates (high bond prices), until 2015. The financial system would close down if the bank stopped buying bonds now. If that happened, guns would quickly replace silver, as the poor man’s gold.
3. The bank has committed itself to continuing QE, until the unemployment rate drops to 6.5%. The latest jobs report showed that the unemployment rate just rose to 7.9%. That data is going to make the Fed even more aggressive in its open market operations involving the T-bond.
4. I refer to gold bullion as “Queen Gold”, and the US T-bond as her secret agent James T. Bond. At some point, Sir James is going to outlive his usefulness to your queen, and a great bear market in bonds will unfold.
5. Specifically, I believe that the pressure put on all fiat currencies by the global tidal wave of QE, will make it appear that hyperinflation is a “done deal”. I don’t think you are going to experience full hyperinflation in this crisis, but you’ll get something very close to it.
6. As that happens, central banks around the world will likely begin raising rates aggressively, to combat the severe institutional loss of confidence in all fiat currencies.
7. So, should you hold & buy gold stocks now, or wait until 2015? The answer is that you should buy now.
8. Why buy now? The answer is now, because when gold first traded above $1800, institutional money managers showed strong interest in buying gold stocks.
9. A lot has changed since 2011, when gold first went over $1800. Shinzo “Mr. Inflation” Abe has been elected in Japan. Also, in April a new Japanese “super-dove” is likely to take the helm of their central bank. Institutional money managers are extremely concerned that Japan’s central bank may literally be on the cusp of a money printing extravaganza. To see the view point of one very astute money manager, please click here now.
10. What kind of institutional buying would your gold stocks experience, if gold were to surge, not just above $1800, but above $2000? I submit that it would be very substantial.
11. With all due respect to the gold stock bears, I don’t think they really understand the fundamentals of this crisis. Most of them are pure chartists, obsessed with a head & shoulders top shape that began forming on the HUI & GDX charts back in 2011.
12. The main driver of your gold stock prices is not the chart shapes flaunted by gold stock haters. It is the ever-evolving action of central bankers, in the gold bullion and T-bond markets!
13. Monday Feb 4, 2013 was a particularly painful day for gold stock holders. Once again, bullion rallied, while junior resource stocks were hit particularly hard.
14. Regardless, I want you to ignore that pain, and take a close look at the “Sir James T. Bond” and “Queen Gold Bullion” charts. As you shall see, central bank liquidity flows are the bullish theme in play. Their actions will fuel institutional buying of your stocks as gold crosses $1800.
15. Much more institutional buying will follow as gold rises over $2000. Their buying between $1800 and $2000 will lift you, finally, out of the gold stocks gulag!
16. Please click here now. That’s the daily T-bond chart, and you can see that it peaked in the October-November timeframe. The bond market has been under pressure since then, while the Dow has rallied.
17. GDP growth has gone negative, and unemployment is suddenly rising. These are not events that make Mr. Bernanke enthusiastic about reducing his purchases of T-bonds in the open market. He’s more likely to increase his purchases than reduce them.
18. Note the 14,7,7 series of Stochastics on that bond chart, and the 4,8,9 MACD series. The bond has stopped falling, and these indicators are turning up, nicely.
19. The action on the daily gold chart is very similar to that on the bond chart. Please click here now. The 4,8,9 MACD “leader” shows a crisp buy signal. The 14,7,7 Stochastics series looks like a golden excavator bucket, ready to scoop up your gold, and place it higher on the chart!
20. Please click here now. That’s the hourly bars chart of the T-bond. Note the head & shoulders bottom that may be forming now. The bond spiked sharply higher yesterday, and so did gold. With each passing day, these two key assets are tracking each other more closely.
21. The 144’12 and 146’18 price points are critical numbers, for gold stock investors. In particular, 146’18 is arguably equivalent to $1700 gold. The T-bond seems set to spike higher, as does gold. A move over 144’12 could take gold over the downtrend line on its daily chart, sparking waves of technical buying!
22. On your own time, please take the time to note the growing synergy of the T-bond and gold market turning points.
23. Let’s take a quick look at three MACD series on the weekly gold chart. Please click here now. Note the crossover buy signal in play on my lead 4,8,9 series. I expect the other two series to play “follow the leader”.
24. Please ignore the GDX and HUI charts until the T-bond and bullion charts begin moving higher. Then re-visit them, and I think you’ll be pleasantly surprised. The bottom line is that February is shaping up to be a very good month, for gold stock bulls!
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