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Gold Stock ETFs: Outrageously Bullish

Stewart Thomson

Jun 24, 2014

  1. Global fundamentals for gold are bullish. Let’s do a quick review of the facts.

  2. Narendra Modi has been elected to build gold-obsessed India into the world’s largest economy.

  3. In China, the government’s plan to transition the economy from export-based to consumption-based is proceeding well, with only a tiny drop in GDP occurring.

  4. In Europe, Mario Draghi is considering implementing QE, and he’s committed to doing “whatever it takes” (money printing) to increase growth there.

  5. In America, Janet Yellen is a dovish Keynesian. Her important 2007 research paper links higher inflation with higher real employment. To review it, please click here now .

  6. In Iraq, Exxon is evacuating personnel. The Kurds, ISIS, and the national government are all fighting each other, while America’s government says they are “monitoring the situation”. The Ukraine situation seems to be worsening on a daily basis. Clearly, the geopolitical price drivers for gold are bullish.

  7. With almost all fundamental and geopolitical lights for a higher gold price flashing green, I’ll argue today that the technical lights are just as green.

  8. Professional investors don’t make a lot of predictions. They lay out possible and likely scenarios, and allocate risk capital only on serious price weakness. On that note, please click here now . This monthly chart, and the HSR zones on it, should be the foundation of all technical analysis about gold.

  9. What is HSR? Well, HSR is horizontal support and resistance.

  10. Gold declined into key buy-side HSR in the $1228 area twice in 2013, where I immediately “ordered” my subscribers to buy, regardless of the pain threshold. I often refer to my subscribers as financial marines.

  11. I use the 5,15 MA (moving average) series to project possible price trends of size, but not to place capital. Substantial capital has been placed by myself and my subscribers in the $1228 area, with an emphasis on gold stock rather than bullion, and now the key 5,15 MA series is on the verge of flashing a massive uptrend signal.

  12. In my professional opinion, the most likely big picture scenario for gold can be viewed by clicking here now . Double-click to enlarge.

  13. In 2009, I suggested that a huge inverse H&S bull continuation pattern was forming on the gold chart. It had “outrageously bullish” implications. I believe a much bigger inverse H&S bull continuation pattern is forming now on the monthly gold chart.

  14. If I’m correct, the “bare minimum” arithmetic target is: $2663. I think my target price is absolutely justified by the global fundamental and geopolitical price drivers.

  15. What about the shorter term picture? To view it, please click here now . A bullish flag pattern is in play for gold on this daily chart. That follows a powerful upside breakout from the sizable (and bullish) green wedge pattern.

  16. If the flag pattern fails, I think that failure would create a bullish inverse H&S bottom pattern. To view this scenario, please click here now .

  17. Rather than bullion, my buy-side emphasis in the $1228 area has been gold stock. On that note, please click here now . Double-click to enlarge. This weekly ZJG-TSX chart shows the price action of junior gold stocks. The chart is “over the top” bullish. Note the sizable bullish non-confirmations taking place on almost all the technical indicators and oscillators.

  18. Volume is immense, and it’s increasing with the rally from the right shoulder low, something that Edwards and Magee outline as highly significant, in their “Technical Analysis of Stock Trends” handbook.

  19. Please click here now . Double-click to enlarge. This weekly GDXJ chart has a record-size bullish volume bar. All of the technical indicators and oscillators suggest that the key highs in the $46 and $54.56 areas will be exceeded.

  20. Please click here now . Double-click to enlarge. This Global X Gold Explorers ETF, GLDX, suggests that gold exploration companies are poised for a spectacular upside breakout, targeting the $37.64 area highs of 2012.

  21. Companies that have minimal hedging programs, or none at all, seem to be leading all gold stocks, from the standpoint of relative strength. Please click here now . Double-click to enlarge. This Pure Gold Miners ETF weekly chart (GGGG-NYSE) is important. The rally from the head of the base pattern to the $14 area exceeded the rally to $13.84, from the left shoulder.

  22. Gold stocks attract momentum-oriented hedge funds, when they trend with higher highs and higher lows, and so the Pure Gold Miners fund is already technically in an uptrend.

  23. Note the bullish blue wedge pattern that formed the right shoulder. If unhedged gold stocks are poised to do best in the coming months, does that mean gold itself is likely to move much higher in price? I think so.

  24. The Western gold community loves junior gold stocks, and the charts of key junior gold stock ETFs suggest that substantial financial rewards for loyal shareholders, are now on the way.

Jun 24, 2014
Stewart Thomson
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