Currently, most commodity indexes are dominated by oil, and game-changing events in the mid-East region are poised to occur in 2016.
Gold tends to track oil very closely. I expect oil to stage roughly a 50% – 100% rally from the 2015 lows, over the next 18 months.
Any company that succeeds in making Indians absolutely comfortable with buying gold online would probably have an effect on the price of gold that is second only to a US financial system implosion.
The shocking online demand growth statistics in India, released by online sales company Amazon this morning, suggest that such a situation may be much closer at hand than most analysts realize.
Gold burst upside from a symmetrical triangle pattern, as I predicted it would, and a painful pullback to the apex (about $1130 in this case) is typically the next technical event to occur.
The banks are likely anticipating this pullback, and adding short positions to profit from it. Gold is showing tremendous resiliency after the breakout.
Is a Scary Drop, and then a POP ahead?
From the apex area, a surge to my technical target area of $1250 seems quite attainable, given the fundamental background of weak global equity markets, the PBOC’s new gold buy program, and surging demand in India.
The cold reality of what I call the coming “bull era” is that most Western gold investors, including myself, got into gold for reasons related to the fear trade.
Ironically, odds are high that love trade demand in Chindia is what ultimately drives gold to prices that enthusiastic fear traders only dream about.
Silver just staged a very interesting breakout, from a multi-shouldered inverse head and shoulders bottom pattern.
In the short term, a quick pullback to the $15 area is possible, but the target of the pattern is the $17.25 – $17.50 area, and I think that’s very realistic.
The bottom line is that when system risk dominates the radar screen, top money managers buy T-bonds and gold bullion.
When inflation dominates, they are inclined to focus on gold stocks and silver bullion.
Gold remains vulnerable now, until Janet takes the rate hike bull by the horns, and takes action.
A downside breakout would theoretically see gold trade at about $1000. The $950 – $1050 area is massive buy-side support.
If there is a fundamental event that could activate a downside breakout from the symmetrical triangle, it’s probably an implosion of a company like Glencore…
For decades, I have defined the August 7 – October 31 time frame as “crash season”. There’s no question that current US stock market price action is very concerning.
The real risk of being invested in US stocks during these three months dramatically outweighs any potential reward.
That’s because GENERATIONAL WEALTH can be destroyed in a few days, weeks, or even hours.
August is typically the set-up month, and the crash and/or ensuing bear market occurs in either September or October.
Conspiracy buffs feel gold is manipulated and want to see a lot more transparency on the COMEX, but I’ve argued that a bigger key to higher gold prices, is to add transparency in Chinese markets.
The Chinese government and central bank are moving very quickly to get that done.
SAFE has started releasing a monthly report of the nation’s FOREX holdings, and that includes gold.
Rather than staging a technical “break down”, silver has essentially been trading sideways, and it has not traded significantly below than the November lows.
From the May highs, silver has drifted lower, whilst gold fell somewhat violently.
This difference in price action is typical when system risk fades, and inflation begins to dominate precious metals price discovery.
This price action suggests a concerning rise in inflation may be closer than most analysts think it is.
I don’t think most investors realize what kind of sea change is taking place in the gold stocks sector right now.
It’s a process that can turn gold stocks into one of the most stable cash flow cows… in the history of investing.
The world gold market is in a state of transition. It’s transitioning from a Western fear trade orientation, to an Eastern love trade orientation, and thus gold is on the cusp of a “bull era”.
A “bull era” is clearly here. Chinese banks are mandated by the Chinese government to promote gold in a positive way.
The world’s largest banks dominate gold trading. They are the “commercials”, and it’s clear they have been very aggressive buyers into the tail end of gold’s seasonal weakness.
Today’s FOMC announcement could lay the foundation for a multi-month rally in gold, silver, and mining stocks.
India is the world’s main market for silver, and demand shrivels a bit during the May – June time-frame.
As a result, the silver price usually swoons, and frustrated investors can make irrational statements about this mighty metal.
It’s just a seasonal swoon, like an ocean tide change. The silver price tide will come back stronger than ever, because demand from the Hindu religion is cyclical and inelastic.
The bottom seasonal line: Eager gold and silver price enthusiasts should expect a major rally to begin in about two weeks, and continue for several months.
Today is gold options expiry day on the COMEX. As expiry day approaches, gold has a tendency to trade sideways to lower.
The most successful investor now is the one who dials down their obsession with predicting the next price move, and simply pours themselves a glass of fine bull era infrastructure construction wine.
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.