The 2008 crisis saw the Fed use some of its tools, but not all of them.
The Fed’s most powerful tools, gold revaluation and money printing, were never employed in that crisis.
QE4, if used to fund government infrastructure spending, can be inflationary, but if the next crisis is severe, only gold revaluation will work to end it.

When some individual gold stocks rise by 100% – 400% in just four months, investors can begin to feel it’s a stock picker’s market. While the best stocks will always produce bigger returns than the worst ones in any sector, I think what is occurring in the precious metal stocks is something very much “bigger”.
There are three powerful forces coming together that could soon create “upside thunder” across the entire gold stocks sector:

China

Fear trade enthusiasts should keep a close eye on the actions of the PBOC (China’s central bank).  Most major actions of the PBOC are not related to the love trade. They’re related to the fear trade.
A growing Chinese QE program, a possible announcement of higher official gold reserves, and/or a public endorsement of gold by the PBOC could create a very powerful rally in gold, and an even bigger one in gold stocks!
If China engages in a major QE program, its stock market could soar higher for years, and citizens would celebrate by buying vastly more gold jewellery.
Nothing the Fed does in its meeting this week will change Apple’s plans for massive sales growth in China, and nor will it change the insatiable and exponentially growing appetite of Chinese citizens to own a lot more gold.

gold

The rise in the stock market is creating a lot of wealth for Chinese investors, and they are celebrating by buying gold jewellery. The first issue of the Apple gold watch sold out in less than an hour in Chinese stores!
Over the next two to three years, Apple will likely need substantial amounts of gold to meet the massive demand for its gold watches. Each watch is made with about two ounces of gold.
Below is a daily chart for ZiJin Mining, the largest gold mining company in China. I own the stock, and I’m an eager buyer of much more stock, on every 25 cent decline in the price.
This great company is clearly poised to be a leader in the gold jewellery oriented “bull era”.

China

The love trade in China and India has experienced astronomical growth in the past several years, as signs of wage price inflation in America are appearing.
These two events are highly supportive for gold prices. With all due respect, most of the amateur analysts still regularly drawing arrows to Pluto or Hades on their gold charts may need to take a large “chill pill”.
Here’s one reason why:

gold bull

The latest US jobs report has stunned most analysts, with its dramatic weakness. Most investors in the Western gold community are nervous about rate hikes, and this report supposedly gives the average gold investor a little breathing room.
I beg to differ. In the current situation, rate hikes are not bearish for gold prices.
They’re BULLISH, and here’s why:

images

Bloomberg reports that investor short positions are now at the highest levels since 2006.
Incredibly,
retail investor short positions on the COMEX, are now larger than their long positions!
Clearly, the gold market window is open, for a violent short covering rally!

China

On March 20, 2015, global gold price discovery changed. Transparency was introduced to the London gold market, as the new “LBMA Gold Price” was launched.
Now, the Eastern love trade is starting to overwhelm the Western fear trade. It’s a theme that will probably accelerate very dramatically in the second half of this year.

Without the Eastern love trade, gold probably would trade in the $700 – $1000 area, if another financial crisis didn’t occur.  That’s because Western fear traders simply don’t buy enough tonnage to overwhelm mine and scrap supply, except in the most extreme and temporary situations.
In contrast, the Eastern love trade should produce consistent 5% – 15% annual gold price appreciation, with very limited volatility, for decades to come.
I expect to see gold stocks make a “stealth” change over the next 1 -2 years, from being the most hated asset class in the world, to one of the most respected. 

freefall

The FOMC meeting looms ahead, as the main driver of global gold prices, in the short term. The policy announcement will be made at about 2PM on Wednesday, and most analysts believe Janet Yellen will remove the word “patience” from the Fed’s position on interest rate hikes.
My analysis suggests gold could trade down to $1095, if the Fed removes the word “patience, and from there a major trade-able rally would begin.

Below is a nice snapshot of the latest COT report for gold.  The commercial traders (banks) have been sizable buyers of gold, into the current price decline.
It appears they are betting on a duties cut in the Indian budget, but whatever the reason is for their current buy program, the commercial traders have a winning track record.  Amateur investors who are shorting gold now, are essentially taking the other side of that trade.
That’s a dangerous and reckless approach to take in the gold market. As the Indian budget is released, the bearish amateur traders are at great risk of receiving a serious financial beating!

gold smuggling

Most gold analysts are vastly underestimating the importance of the titanic changes taking place in the world gold market.
In the big picture, 2015 is likely to go down in history as the year that transparent and legitimate price discovery returned to gold.
All gold community eyes should be on the month of March, for three key reasons: