Gold & Digital Gold: Both Assets Are Great! Stewart Thomson
Jul 24, 2018
- In 2013 and 2014 I predicted the Fed would lead the ECB and the BOJ in a slow but steady reversal of central bank policy, from QE/low rates to QT and relentless rate hikes. Even more shockingly, I predicted this would create a money velocity bull cycle in most Western countries. I also suggested that during this process the world’s greatest asset (gold) would regain its position as the most respected asset.
- Please click here now. Double-click to enlarge. I’m predicting that the ECB joins the Fed in substantial balance sheet contraction in 2019, and the BOJ won’t be far behind.
- As that happens, I expect the dollar will resume its long-term bear market against gold and experience a substantial decline against the yen.
- Institutional money managers are becoming concerned about the decline in liquidity in many bond markets around the world. I would suggest this is only the tip of the inflationary iceberg.
- Please click here now. Double-click to enlarge. From a technical perspective, the US government bond market looks like a train going off the tracks on the side of Mount Everest!
- There’s a massive head and shoulders top in play. Bond market money managers are trying to talk the market higher in the face of Powell’s significant balance sheet contraction and rate hike actions. Those money managers will likely fail, and fail badly.
- Japanese banks will become must-own stocks as the BOJ begins rate hikes and QT. Their ability to make a profit has been severely hampered by the BOJ’s crazed QE and ultra-low rates policy.
- What’s particularly interesting is that Japan’s citizens are massive savers. They will move significant funds into the banking system as the BOJ tightens. Japan will soon become a major exporter of inflation to America and to the rest of the world. The same thing will happen in Europe as the ECB begins QT and rate hikes.
- Please click here now. Double-click to enlarge this key gold chart. When the weekly chart Stochastics oscillator (14,3,3 series) becomes substantially oversold in July or December, as it is now, gold becomes a “must-buy” for gold asset enthusiasts.
- Please click here now. The smart money commercial traders are often aggressive buyers of gold on the COMEX in July.
- Clearly, this year is no exception to that golden rule! The commercials bought about 28,000 long gold contracts (basis the latest reporting period). I’m predicting they will buy an additional 25,000 to 75,000 contracts if gold trades in the $1200 - $1180 area.
- It’s very important for gold asset enthusiasts to focus on buying gold-related items in July like shopping for groceries in a grocery store. The commercial traders are simply adding modestly to their long positions, and that’s what gold bugs must do too.
- Many technical analysts appear to be trying to outsmart the commercial traders using their charts. They are looking for lower prices some kind of “final low.” I don’t endorse that type of approach to building wealth in the gold market.
- It’s far more rational to simply go shopping with a grocery cart when the sale is ongoing (now) than to try to identify the final day or hour of this price sale.
- Morgan Stanley’s analysts have predicted that India’s central bank will likely raise rates at the August 1, 2018 meeting. A rate hike there would likely create a rally in the rupee and lower the price of gold in India. That would likely create substantial buying by jewellers and dealers. I’m quite sure this is what the COMEX commercial traders are focused on now.
- A rate hike by Powell in September is also positive for gold. It could roil US stock, bond, and currency markets.
- Please click here now. Double-click to enlarge this long-term gold chart. The giant inverse head & shoulders bottom is near completion. Perfect symmetry would be achieved with a dip to the $1200 - $1180 zone. All gold market investors should be very enthusiastic now, as the rally from this pattern could be record-breaking in terms of its relentlessness.
- Please click here now. Double-click to enlarge. Gold is the world’s greatest asset, and bitcoin is the most exciting! Some call it digital gold. Some call it a fad. Some call it in need of regulation. I call it headed for my $40,000 target!
- You won’t see heavyweight mainstream analysts talking about “sky high” price targets for gold (and rightly so) but many of the best ones do it with bitcoin. Tom Lee is one of the world’s most respected equity market analysts. His ultimate target for bitcoin is above $200,000. His year-end target of $30,000 is slightly below mine, but still very solid. These high price targets are achievable with bitcoin as opposed to gold, because the total supply of gold grows slowly but still grows, whereas the supply of bitcoin is absolutely fixed at around 21 million coins.
- In terms of market capitalization, bitcoin makes up almost 50% of the entire crypto asset class. The forks appear to produce no significant dilution. They are more like corporate spin-offs than dilutions of this mighty coin!
- A week ago, I urged investors to buy bitcoin in advance of the inverse head and shoulders bottom pattern breakout. Just hours later, bitcoin blasted through the neckline of that pattern. I then advised investors to do further buying with their eyes closed. I did that because it’s pointless to wait for minor pullbacks when a major buy signal is in play. That call is working out very well.
- With the involvement of banks, hedge funds, and regulators, it’s becoming quiet likely that bitcoin is here to stay. Eager wealth builders can get in on the blockchain/crypto action (mining and investment) with my www.gublockchain.com newsletter.
- Please click here now. Double-click to enlarge this important GDX versus gold chart. I’ve suggested that while the outperformance of GDX against gold during this substantial gold bullion price sale is due for a pause, I think it’s only a very short pause that will end after the Indian central bank meeting next week.
- Please click here now. Double-click to enlarge. Against the dollar, GDX has continued to build an enormous base in my buy zone of $23 - $18. The $21 area is the “meat and potatoes” of that zone. Investors who have gone shopping for gold stocks on a weekly or monthly basis in this price zone should be sitting happily on some great core positions, and ready for some great upside action that appears to be imminent!
Jul 24, 2018
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