After rallying about $250 towards the 2015 highs of $1307, gold has simply traded sideways in a very orderly fashion.
Gold is likely to grind sideways in a rough $1250 – $1300 range until the next big upside catalyst arrives to push it towards my $1350 target.
What could that catalyst be?
Was the entire gold price rally during the 2000 – 2011 time frame really just a giant bear market rally? Well, when viewed on the gold versus money base and inflation-adjusted price charts, the answer is probably: Yes.
The good news is that rising inflation is now launching a new major bull market for gold in inflation-adjusted prices, and against the US money base. That’s why gold stocks are staging such a stunning performance against all fiat currency, and against gold too!
If gold is beginning a fresh inflation-adjusted bull market, gold stocks are likely only beginning what could be a multi-decade period of dramatic outperformance against fiat currencies and gold bullion.
There’s a very large inverse head & shoulders bottom pattern forming in gold, and I expect the right shoulder low could occur around the April 19 time frame.
While anything is possible in any market at any time, including new lows for gold, I think the Western gold community is starting to look pretty good here, given the sizable institutional buying taking place “across the board” in gold stocks.
Because a lot of that buying is value-oriented, even if gold did “impossibly” go to a new low, the substantial institutional commitment to gold stocks that is in play now is likely to accelerate. Simply put, there’s a wave of confidence sweeping through the institutional investor community about gold stocks, and I think it’s time for the Western gold community to grab an extra gold stocks surfboard, and have some fun!
Gold has staged a majestic upside breakout. My $1320 target is coming closer.
It’s important to understand the difference between the gold market now, and during the 2009 – 2011 rally:
All lights for gold are green, and rather than beginning a correction, gold may be poised to intensify its rally.
India may cut the import duty on Sunday night.
If the dollar declines further against the yen, while an Indian duty cut occurs, gold could stage a powerful “overshoot” move, well beyond the $1310 target zone, and closer to $1400.
The chart below is arguably the global financial markets’ “chart of the year”. The massive bullish wedge pattern in play on this daily bars GDX chart looks truly spectacular.
Note how close GDX is to staging a significant upside breakout above the supply line of the wedge! Within GDX itself, many of the component stocks are staging massive upside rallies.
That suggests a GDX breakout is now imminent.
The massive bull wedge pattern in play suggests than an “institutional awakening” is at hand for the gold stocks sector, as the oil supply glut and Janet’s rate hikes send global stock markets into a financial gulag. I’ll dare to suggest that equity-oriented money managers are soon going to view gold stocks as asset class champagne!
In the big picture, the good news is that the dollar is showcasing a huge head and shoulders top pattern against the yen, and a major uptrend line has been decisively penetrated to the downside.
In the short term, unfortunately, the dollar is likely to rally back to the broken trend line, and that could put some temporary pressure on the price of gold. Gold is likely to ease to $1033 – $1045, if the dollar rallies against the yen.
From there, the largest gold rally seen in many years is likely to occur, as the dollar gets crushed by safe-haven buying of the yen.
The dollar has staged a major breakdown against the yen, and large FOREX traders tend to base their dollar-gold trades on the dollar-yen chart action, more than on movements in the overall dollar index (USDX).
In the short term, I expect the dollar to rally a bit against the yen, and that could push gold modestly down, to the $1070 – $1080 area.
From there, I expect the dollar to stage a major decline against the yen, creating a massive rally in gold.
One of the most important fundamental events of 2016 in the gold market is the launch of the Shanghai Gold Exchange (SGE) gold benchmark.
The launch could occur in April, and it’s possible that India cuts its gold import duty around the same time. This is very bullish for gold.
While gold, the mightiest of metals, is off to a flying start for 2016, things are certainly looking “less than rosy”, for the US stock market…
India continues to move closer to a massive 80% chop in the gold import duty.
The news for silver is, arguably, even better than for gold!
Indian imports of silver have been surging, and are approaching 8000 tons on an annualized basis. The import duty applies to silver as well as to gold.
A chop in that duty could lead to even bigger demand for silver.
The Western gold community is now entering the year 2016, as gold approaches another mighty support zone, this time at $1033. It’s unknown whether gold enters that support zone, or rallies from just above it.
What is known is that this is a major buying area, and a generational low appears to be in the works for both the bullion and the miners.
Intestinal fortitude, and nurturing of investor spirit, are all that is required now.
At some point in the future, the highs in the $1900 area will become a major support zone, as the $1033 area is now.
Note the rising volume with rising price, and declining volume, with declining price. The primary trend is unchanged, and it is bullish.