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Gold Relaxes In $1250 -$1300 Range Trade

Stewart Thomson

May 17, 2016

  1. Gold continues to garner solid global institutional support, and shows great resiliency on every sell-off against the dollar.

  2. Please click here now. Giant bank Credit Suisse has joined the bullish forecasting fun, by raising their price targets for both bullion and mining companies.
  3. Deep-pocketed funds and banks are embracing the world’s mightiest asset with gusto, and that’s apparent in the price charts.

  4. Please click here now. Double-click to enlarge this daily gold chart. After rallying about $250 towards the 2015 highs of $1307, gold has simply traded sideways in a very orderly fashion.

  5. Investors should cast aside fears about “imminent” and “frightening” price declines, because large banks and powerful hedge funds move vast amounts of liquidity. They are generally unwavering now, in their commitment to gold.

  6. 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.

  7. What could that catalyst be? At the top of the list is another rate hike from Janet Yellen. Her first rate hike caused a massive US stock market panic, and she’s held off on any more hikes since that happened.

  8. Unfortunately for US stock market investors, signs of inflation continue to grow, and I don’t think these investors are listening to Janet’s statements with enough care.

  9. Janet Yellen has clearly stated that oil’s decline is temporary, and that signs of inflation are appearing.

  10. On that note, please click here now. Double-click to enlarge this daily oil chart. Oil is by far the largest component in most commodity indexes, and now it’s rallying on stronger demand versus supply metrics.

  11. Please click here now . Heavyweight analysts at Goldman Sachs are raising their price targets, and the tone of their statements is very positive.

  12. Most analysts think the Fed is in a bit of a tight spot, whereas I’ll dare to suggest its power is greater than ever. Here’s why: Before the QE “money ball” existed, rate hikes tempered inflation and rate cuts helped create it.

  13. Now, rate hikes help create inflation by incentivizing banks to move the money ball into the private fractional reserve banking system. Potential profit is much higher there than at the Fed. Movement of the huge money ball puts significant upwards pressure on money velocity and inflation.

  14. At the same time, it puts downwards pressure on the stock market, and on the ability of the US government to finance its debt. The bottom line is this: QE created a giant money ball, but it’s the exit of that money ball from the Fed and into the private banking system that will create significant inflation.

  15. The Fed essentially carries a big stick that it can wave over the heads of the US government and stock market investors, while anything it does now is positive for the price of gold. This is a true “Have your cake, and eat it too!” situation for the Western gold community, for the first time in American history.

  16. Please click here now. Double-click to enlarge this key quarterly bars chart of the CRB index. It’s bouncing off trend line support in the 160 area. The rally is clearly inflationary.

  17. For a closer look at the price action, please click here now. Double-click to enlarge. There’s a nice base pattern on this CRB daily chart, which suggests the rally is only in its infancy. I’m an eager buyer of a number of the underlying commodities in this index.

  18. All fear trade lights appear to be green for gold and commodities, and now the World Gold Council (WGC) may have just flashed a big green light for the love trade. Please click here now. The entire gold price rally in 2016 took place with Indian demand very quiet. If inflation in the West ticks higher as India joins the buy-side action, a huge acceleration of the gold price rally is likely to occur.

  19. Please click here now. Double-click to enlarge. GDX is battling resistance in the $26 -$28 area, as shown on this daily chart.

  20. Gold stocks are more volatile than gold, but I’ve suggested that gold stock enthusiasts should put the proceeds of any profit booking into paper gold ETFs and funds like SGOL-NYSE. That keeps investors in the “bull era game”, while chopping risk a bit as GDX recoils in this resistance zone.

  21. Also, the US business cycle is very old now, as is the American empire itself. If America tumbles into recession and the stock market crashes, Janet Yellen may decide to announce a gold buy program very similar to the programs in play in China and Russia.

  22. I don’t believe there will be a one-time revaluation of gold like occurred back in the 1930s, but the announcement of even a modest buy program by the Fed/Treasury could send gold $100 to $200 higher within minutes of time.

  23. Investors who are in gold rather than fiat will do well in that situation. Also, any downside price action in gold bullion in the short term is likely to be mild.

  24. Please click here now. Double-click to enlarge this monthly SIL silver stocks ETF chart. SIL is very close to breaking out of a gigantic bull wedge pattern, and the current hesitation in the trend line area is very healthy. Any kind of uptick in inflation from here is going to put silver stocks on the radar screen of powerful money managers who already are serious buyers of gold stocks.  Right now, silver stock enthusiasts should be eager buyers of any ten percent pullbacks in SIL and their favourite silver mining stocks!


May 17, 2016
Stewart Thomson
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