yellen

Wealth in the stock market that is “here to stay”, is generated by buying business cycle troughs, not peaks.
While most bank economists and gold community analysts predicted a Fed taper would crush the price of gold, I suggested it would cause gold to rally, and turn the Dow into a wet noodle, and that’s exactly what has transpired.
Here’s what will happen next: 

launch rocket vertical

In late 2013, I predicted the Fed would taper all the way to zero in 2014, and suggested that taper would turn the Dow into a “wet noodle”, while creating a rally in gold prices. That’s the opposite of what most analysts thought would happen in 2014, and it’s exactly what has transpired.
The risk of a complete global stock market meltdown is growing now. The Fed’s number two man, Stan Fischer, has thrown gas on the fire, by aggressively suggesting the Fed’s next move will be to raise interest rates.
Many investors are assuming the Fed can engineer another huge stock market rally with further easing.  
Instead, what they could experience is something more akin to an economic ice age.

gold bull

A major decline in oil prices that causes a collapse in global stock markets while Indian gold demand surges, is likely to entice those money managers to recommend gold stocks to their clients.
As the dollar has rallied, the price of silver has declined significantly, and the gold to silver ratio has soared to the 70 – 80 area.
What are the implications for silver, if there is a global stock markets crash caused by deflating oil prices?

gold bull

The average gold bear already looks a bit like the wolf character from the fairy tale, “The Three Little Pigs”.
The wolf repeatedly blows hot bearish analysis air at the gold brick house, and the house just stands there, immovable.

I’ve predicted that Queen Bankster Janet” will begin raising rates by mid-year of 2015, and that’s bullish for gold.
Here’s why: 

Source: Banzai7

The QE program created substantial hedge fund interest in gold-related ETFs. Unfortunately, QE never created the inflation the funds had anticipated.
That’s because commercial banks held the QE money they received, “tight to the chest”, rather than loaning it to businesses and consumers.
In a nutshell, by enlarging the money supply while GDP was falling, the Fed created deflation.
So, if the Fed were to shrink the money supply now, or at least reduce its rate of growth, while GDP rises, and banks start making loans with their “QE booty” at the same time…. is that inflationary?
The answer is yes.

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During the first half of 2014, Chinese gold demand was not spectacular, but it was decent,and it appears to be rising again.
Technically, gold appears to set to rally from around the time the September 5th jobs report is released.
Is the rally likely to be a little one, or a big one?

gold

Given the stunning Indian and geopolitical price drivers now in play in Iraq, Syria, and the Ukraine, I think gold could charge beyond $1325, and on towards the $1347 and $1390 area highs.
Silver, which is perhaps better referred to as “gold on steroids”, looks even better. 

gold-coin-sales-halted-chi-20140807-001At about 2PM today, the next FOMC minutes get released.
The bottom line: With the CRB index approaching solid support, any gold-negative news is not likely to move the price of gold lower than $1275.

The upside numbers of importance are $1325, $1347, and $1392.   This is a different market than it was, when QE was the main theme of global gold price discovery.
While it will likely take longer than most investors expect for gold to rise significantly, it will still rise, and gold and silver equities are poised to do extremely well.

Indian goldMost investors buy gold because they are nervous about the financial system, government debt/bureaucracy, central bank money printing, and dangerous geopolitical developments.   In a nutshell, that’s the “fear trade” for gold.
The fear trade is a great reason to own a core position in gold now, and forever.   Gold should be the first item bought in any investment portfolio. That’s because lowest risk assets must be bought first, not the ones that appear to offer the most potential reward.
Ironically, it’s probably going to be the “love trade” (gold jewellery), not the fear trade, that makes the Western gold community a lot richer.

Summer_SaleA floor is not a “bottom that occurs just before blastoff!” event.   It’s a general price zone of enormous support, where downside price volatility should not be feared.
As the month of August gets underway, the gold market has a solid feel to it.
The commercials are still net short at least 160,000 contracts in gold.
There is great symmetry between the actions of the commercial traders in July-August 2009 and their actions today.

summerLet the Good Times Roll!
During the first six months of 2014, there have been quite a number of events that are positive for the gold market, and there was a big one yesterday.
Gold staged a nice breakout from a small bullish wedge pattern last night, and the entire chart has a very bullish look.

Why is that?   Well, the month of August can see Indian citizens buy enormous amounts of gold, as they begin preparations for the wedding season and Diwali.   Expectations of those liquidity flows into gold are likely why the gold chart looks so bullish now.

china goldAs the Western business cycle matures, inflationary pressures tend to rise. I’ve predicted that 2014 H2 (2nd half of 2014 calendar year) would see institutional money managers and Fed officials begin to talk about growing inflationary pressures. That’s starting to happen now.
The time to be heavily invested in the precious metals sector is not later. It’s now.

goldDubai is known as “offshore India”.   The city’s gold business is run mainly by Indian precious metal industry experts, and Indians dominate the buy-side of the trade.
As the gold jewellery era unfolds, Dubai should completely dominate all gold markets.
It will be the undisputed king of global gold price discovery very soon.
The battle for control of gold price discovery is probably best summed up like this: Singapore and Shanghai may talk a good talk, but only Dubai walks the walk.
In the supposed battle to overtake London and New York as the prime market of gold price discovery, there is everyone else, and then there is Dubai.

goldWhile the short and intermediate trends for gold are greatly influenced by Fed policy, events in China and India are now the key drivers of gold’s primary trend.
As important as today’s FOMC minutes are, on Thursday the Modi government releases its first budget. The most powerful gold dealers in the world are intensely focused on this budget.
Gold’s next primary trend move could be determined by what happens in India on July 10.

The government itself is extremely tight-lipped about what will happen, and that’s creating the potential for a violent gold price move to the upside or downside, as the budget is released.
It’s possible that the FOMC minutes create strong selling, but a gold-bullish budget from India quickly reverses that, and sends gold surging towards my target of $1432.