Metal Surfers & Fed Tidal Wave – Stewart Thomson

silver waveSubmitted by Stewart Thomson:

Too much money printing can cause a currency panic.  That would be followed by institutions pulling out of the country altogether.
The reason I want own to gold is because governments are attempting to print their stock markets higher.  Gold and resource stocks will drastically outperform the global stock market indexes like the Dow and the Nikkei.

The period of drastic out-performance should have come earlier, but it didn’t, due to the implosion of Lehman.  Gold and gold stocks were beginning to go parabolic in 2008While the Lehman event delayed the parabolic move, it also made the crisis bigger, and probably greatly increased the size of the ultimate move.

On the daily chart, bonds are the most oversold, and gold is close behind.  Don’t worry, silver is in very good hands, and soon the “wild one” will be oversold too, and ready to surf the rising Fed balance sheet, to higher prices!


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1.    President Obama gives his State Of The Fiat Union speech tonight.  While I hope he takes the opportunity to recommend that America’s citizens purchase a bit of gold, somehow I don’t think that will be happening.

2.    Please click here now.  You are looking at the Bank of Japan’s balance sheet.   More and more central banks are jumping onto the QE bandwagon, which is highly inflationary.

3.    One member of the Japanese government is “demanding” that the Nikkei (Japanese equivalent of the Dow) rise to 13,000 within two months.  Please click here now.  That’s the monthly chart of the Nikkei.

4.    While it’s broken out of a drifting rectangle (highlighted in blue), there is enormous overhead resistance in the 14,000 area.  It’s not quite as simple to “print a stock market higher” as the Japanese government would have you believe.

5.    Too much money printing can cause a currency panic.  That would be followed by institutions pulling out of the country altogether.

6.    The reason I want own to gold is because governments are attempting to print their stock markets higher.  Gold and resource stocks will drastically outperform the global stock market indexes like the Dow and the Nikkei.

7.    The period of drastic outperformance should have come earlier, but it didn’t, due to the implosion of Lehman.  Gold and gold stocks were beginning to go parabolic in 2008.

8.    While the Lehman event delayed the parabolic move, it also made the crisis bigger, and probably greatly increased the size of the ultimate move.

9.   Please click here now.  The HUI index of gold stocks peaked against gold in 2003.  Ten years later, gold is much higher, and the stocks are still languishing, but so is the Nikkei.

10.              Note the tightening of the Keltner bands on that HUI:gold ratio chart.  The tightening indicates that gold stocks should be accumulated with some profits from gold bullion holdings.

11.              Governments are determined to reflate.  The problem is that they are launching the reflationary actions from a platform of enormous debt, rather than from the “floor” of a 1929-style collapse.

12.              The refusal to cut the size of the debt opens the door to cost push inflation (CPI).  CPI opens the door to soaring gold stocks.  It will take several years for QE to create CPI, although it could happen more quickly in Japan.

13.              In America, the Fed believes in an approximate 8 year business cycle.  The last cycle ended in 2007, and the next one will probably end in 2015.  As growth fades and CPI grows, your gold stocks could rise much more dramatically than they did during the 1970s and the 1930s.

14.              I realize that a lot of investors in the gold community are disappointed with yesterday’s price action, but gold moves from periods of being overbought to oversold quite regularly.  Hoping for CPI to envelop your gold stocks now is not realistic.

15.              Please click here now.  You are looking at the daily chart for gold.  Note the action of the 14,7,7 Stochastics oscillator that I use.  Momentum-based rallies tend to occur when the oscillator flashes a buy signal in the 40-60 zone, but such signals are quite unreliable.

16.              While we all hope for a momentum-based rally at pretty much all points of time, most rallies tend to occur when a crossover buy signal occurs after the lead red line touches 20 on that daily chart.

17.              The bottom line on that front is “close, but no cigar!”. Having said that, gold is much closer to being oversold than overbought.  Cheer for momentum-based buy signals, but buy only value-based ones, with the Stochastics in the 20 zone!

18.              Please click here now.  That’s the most-recently updated chart of the US Central Bank’s balance sheet.  It’s surging.  Maybe President Obama ordered the ESF (exchange stabilization fund) to short gold, so that his fiat speech goes off without a hitch.  Maybe gold just wasn’t quite oversold enough at $1680, to start a trending move higher.  Those are minor issues.

19.              The big issue for gold investors is the Fed’s balance sheet.  It’s growing again.   If you want to essentially take the other side of the overall central bank position on gold, you may not fare well.

20.              Please click here now.  You are looking at the daily chart of the US T-bond.  A bullish wedge is beginning to form.  Gold and bonds will continue to move together, until cost push inflation is widely recognized.

21.              Bond prices have stopped declining, and the 14,7,7 Stochastics oscillator is flashing a crossover buy signal, after going under 20.  That’s good news for gold!

22.              Silver fans should probably click here now.  That’s the hourly bars chart.  We all hoped silver would break out upside, but it didn’t happen.  The target is about $30.

23.              Focus on what the silver asset is.  It’s a great asset.  Think of it like the ocean; the tide goes in and out, but the ocean is still there.  Sometimes silver is overbought and sometimes it is oversold.  Dreaming that the ocean is going to jump up and walk on the land is not realistic.  Likewise, dreaming of silver at a thousand dollars an ounce, while selling it on a $1 dip in price in a panic, is equally unrealistic.

24.              Please click here now.  That’s the daily chart for silver.  On the daily chart, bonds are the most oversold, and gold is close behind.  Don’t worry, silver is in very good hands, and soon the “wild one” will be oversold too, and ready to surf the rising Fed balance sheet, to higher prices!

 

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Thanks!

Cheers

St

 

Stewart Thomson

Graceland Updates

 

 

Written between 4am-7am.  5-6 issues per week.  Emailed at aprox 9am daily.

 

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Email: stewart@gracelandupdates.com

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Comments

  1. Posted on Seeking Alpha–(I have a very modest amount of Gold, –4 oz)
    The Real Reason Not To Buy Gold

    February 12, 2013 by: Macro Investor

     
    Gold’s year likely just got a lot worse.

    A very important news article came out overnight on February 11 from India. The Indian current account deficit is projected to grow to historic highs in 2013. Reports NDTV:

    RBI governor Duvvuri Subbarao today cautioned the country was headed for the highest ever current account deficit this fiscal year, after it rose to 5.3 per cent of GDP in the second quarter.
    “We would not worry if the widening CAS is on account of import of capital goods, but here it is high on account of import of oil and gold.”

    Oil and gold are the two largest drivers of the current account deficit for India. As a growing economic power, India needs oil. However, gold is simply a drag on the economy. If the government wants to clamp down on the deficit, gold is likely the place where it would look to cut. But how much cut would be needed to bring the deficit to a level that is sustainable? Reports NDTV again:

    According to both the government and the RBI, a 2.5-3 per cent current account deficit is sustainable, otherwise it can impact the balance of payments (BoP) position.

    So there we have it. The Indian government needs a 3% reduction to its current account deficit. This amounts to about $55B, given that GDP is $1.85T. Assuming that half of the deficit reduction will come from gold imports, and at the current price of $1,650/oz, this amounts to a whooping 475 tonnes of reduction in Indian gold imports, or about a 60% reduction from the current levels of 800 tonne. In turn, this amounts to 10-15% reduction in world gold demand for 2013.
    If this truly ends up being the case, gold prices will be under severe pressure. Prices stayed almost flat when India lowered imports by about 200 tonnes in 2012, as China made up for the gap. However, China imports will have to go up by more than 50% in 2013 if Indian demand were to drop by 60%, given that China still imports slightly less gold than India. And that, at best, will keep demand and prices flat.
    So how did the market react to this? Reports NDTV again:

    Gold prices today lost Rs. 210 to slip below the psychological Rs. 31,000 mark at Rs. 30,790 per 10 grams on heavy selling by stockists.
    Investors were seen shifting funds from the weakening bullion to the strengthening equities, and retail customers refrained from purchasing as expectations of more corrections hit sentiment.

    This is expected. Indians love gold, but they love returns more. If equities provide better returns, that’s the direction Indians will go.
    What does this mean for your investment thesis for the rest of 2013, dear reader? Well, my projection for gold prices (GLD) in 2013 remains unchanged, that shorting gold — especially via the miners remains the play for 2013…….I think the miners are really setting up to be perma shorts with falling gold prices and rising mining costs. I am up on this position by about 2%. I believe it is just the beginning and it is a matter of time till the miners see a steep drop. Of course, nothing is a guarantee, but the Government of India position gives me a good reason to believe that I will make money on this.
    Disclaimer: This is not meant as investment advice. I do not have a crystal ball. I only have opinions, free at that. Before investing in any of the above-mentioned securities, investors should do their own research, consult their financial advisors, and make their own choices.

    • “This is expected. Indians love gold, but they love returns more. If equities provide better returns, that’s the direction Indians will go.” 
       
      This clown clearly doesn’t understand why Indians buy gold and Indian culture. Besides, if you believe this nonsense then  watch silver drop even further considering the strong correlation between G&S since the “bull” began. 

    • Yes, Indians do love gold and they have good reason to do so.  Regardless of what the Gov over there wants, it is unlikely to prevent Indian citizens from continuing to buy gold.  Since a lot of gold can be smuggled into the country via over-land routes from Myanmar through Bangladesh or via small boats, cutting off the supply will be very difficult.  Any significant monetary problems in India are only likely to spur even greater interest in PMs.
       

  2. When I see the word “Oversold” I think I understand what it suggests (to much of something) but, it doesn’t seem to fit the context. In trader speak, what does oversold mean? What am I missing? 

    • When you see “oversold”, you have to consider who’s saying it.  If it’s Goldman Sachs, it means the opposite.  And none of these terms apply to physical metal, the supply and demand of which do not determine the price.  The paper market dwarfs the physical market, and the the market can be flooded with paper sell orders any time TPTB see fit.  Once the physical market is separated from the paper market we’ll see real price discovery.

  3. In the case of gold, oversold may well mean that the same quantity has been leased out several times over.

  4. Sorry I skimmed over the whole piece, read the bottom which said “special offer EFT” and thought wtf, I thought I was bad selling silver and gold like Snake oil, but you can’t even be bothered with the snake you gone straight for selling water with an aspirin in it.

  5. Thanks for the great news man, any word on whether or not we’ll get over 31 again today since the drive by shooting just happened?
    Talking up technicals and fundamentals which don’t mean shit in a rigged casino, and shilling paper investment vehicles which are part of the problem. Zero for 2. Take a hike.

    The market is getting more overtly, and increasingly, obviously corrupt and rigged. Pretending it isn’t does all of us a disservice.

  6. I don’t like getting into arguments about which is the better store of value – gold or silver. The important thing is that investors put some portion of their portfolios into precious metals. Here’s an extract from a blog-post of mine in March, which illustrates my point.
    Imagine a newborn baby being given a $35 gift certificate in 1971 and his twin given a one-ounce gold coin. Guess which of them would be the most pleased today. The one with the coin could buy almost fifty times as much stuff as his brother could, with the gift. I can hear my granddaughters now, “Grandpa, thanks for the $1700 birthday gift certificate (as if…!), but could we please have a gold coin instead?”

  7. I picked up on a report that suggests gold will go under $1,000.  The reasons did not make sense.  But if India tries to curb gold imports the RBI and government will lose.  10-25% of Indian gold imports are smuggled into the county.  Gold in rupees is well above the paper price.  Indians are no more going to stop buying gold than anything other activity that benefits their economic wellbeing.  The government is corrupt and repressive; Indians know that and stack to avoid the devaluation of the rupee. india is also buying something on the order of 125 MOZ of silver.  Any slackness in the gold market in India will be instantly taken up the the central banks who have been found with empty vaults and demands from countries who want their gold repatriated.  The gold supply squeeze is almost as bad as the silver supply squeeze.   Even scrap gold is in short supply, down 50% in recent months. Besides which, Russia, the largest petroleum producer in the world, will buy any gold available.  Putin seems to pretty much control or own many of the oil companies so oil and gold are the same thing, valuable and increasingly scarce commodities.  Oil goes out of one pocket, gold goes goes in the other one. And that is his flat out admission.

  8. Indian officials have done their best to beat this shit out of gold with duties, and have been overtly negative towards it. The obvious result has been record smuggling. Any notion that the lure of stock market returns will quell the multi generational, central role precious metals play in the lives of indians is couched in nothing more than a typically arrogant western xenophobic attitude.
    https://goldnews.bullionvault.com/india-gold-bullion-020520123

    • “Any notion that the lure of stock market returns will quell the multi generational, central role precious metals play in the lives of indians is couched in nothing more than a typically arrogant western xenophobic attitude.”
       
      Perhaps.  Or it is likely that those who buy and sell stocks for a living always see stocks and stock ownership in a positive light.

  9. I consider the stock markets to be vampires sucking the wealth out of a country. They don’t produce anything physical that would increase a countries GDP via exports.

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