Gold: Demand Vacuum Has Silver Lining Stewart Thomson
Oct 3, 2017
- Since I issued my “book profits now” call for gold several weeks ago, the price has declined relentlessly from the $1360 area high.
- Investors want to know if I see signs that a fresh rally could begin. The good news is that gold/silver stocks and silver bullion look better than gold bullion. Some stocks are rallying strongly while gold oozes lower.
- Please click here now. This is the main problem for gold right now; a collapse in Indian market demand.
- Prime Minister Modi has acted more like Prime Minister Napoleon over the past year. He’s lorded over a collapse in manufacturing, anemic jobs growth and tanking GDP. He has essentially devolved into what I call a “taxaholic”. He’s maniacally obsessed with expanding government size at the expense of the economy.
- Modi has ordered jewellers to file what he calls “Know Your Client” forms on gold jewellery purchases of 50,000 rupees or more. That has helped hammer demand by about 50%. It coincided with major flooding that prevented buyers from going to the stores.
- Over the past few weeks, Indian gold imports have been negligible. Commercial COMEX traders have sold into that demand vacuum, pushing the gold price down by about $90 an ounce.
- Dhanteras marks the start of Diwali on October 17. I expect some pick-up in demand then. Unfortunately, that doesn’t happen for another two weeks.
- The Chinese “Golden Week” holiday is also in play. Gold markets in China close for the holiday. Western gold bugs are finding the holiday is anything but golden for them, as the price seems to melt lower on a daily basis.
- Fear trade selling tends to produce violent price sell-offs. Love trade demand vacuums tend to produce the current “oozing” in the price. It’s not frightening for investors, but it’s disappointing and disheartening.
- The bottom line: Physical demand in both China and India is weak, and while buying in the SPDR fund (GLD-nyse) has been solid, it is nowhere near enough to overwhelm total supply.
- Please click here now. Double-click to enlarge this gold chart. The technical picture reflects the fundamentals. Gold has a head and shoulders top pattern in play. Unfortunately, the target of the pattern is about $1215.
- As the price rallied towards $1360, I noted that key Indian dealers were adamant that they would only be buyers in the $1200 area. At the time, that price seemed impossible to most Western investors. How impossible does it seem now?
- For a closer look at the price action, please click here now. Double-click to enlarge. The H&S top pattern is just plain “nasty”, but gold is now near a key Fibonacci line that sits at about $1268 on this December gold futures chart.
- The next US jobs report is scheduled for release on Friday. Gold has a rough general tendency to rally after the report is issued. A rally from either $1268 or the 76% retracement line at $1245 is likely, but a sustained move higher is unlikely to begin until Dhanteras ushers in Diwali on October 17.
- A crash in the stock market could jump start the rally, but please click here now. Chinese regulators just cut the amount of reserves banks need to hold. That’s pouring liquidity into the stock market. It happens just after a great US manufacturing activity report yesterday. So, a stock market crash soon is possible, but unlikely.
- Gold market fear trade enthusiasts should focus on the December debt ceiling issue, rate hikes, and QT (quantitative tightening).
- Please click here now. Because government lunatics keep borrowing money, it takes very little in the way of rate hikes to create a bear market for general equities.
- The Fed is on track to raise rates three times in 2018, and to launch accelerated quantitative tightening. It will be very difficult for the stock and bond markets to keep rising in that environment.
- I suggested that the 2014 – 2015 period would see gold trade sideways with a slight downward bias, and 2016-2017 would see it trade sideways with a slight upwards bias. That’s exactly what has occurred.
- 2018 should see gold begin a trending move to the upside. The fundamentals auger for that, and so do the charts. Please click here now. Double-click to enlarge. The current vacuum in love trade demand is creating needed right shouldering symmetry on the long term gold chart.
- I expect Trump to continue to essentially do what he promised to do in his election campaign. His most important promise is to give government bond market creditors a haircut on what they get paid.
- The US government bond market will collapse if the debt ceiling isn’t raised. Trump will get the bulk of his tax cuts platform passed, in return for raising the debt ceiling. He’ll then “finance” the rising deficit by attacking foreign holders of US government debt.
- This will occur as China launches its new oil for gold contract, which is optional for oil exporters. I doubt it creates the price parabola that many investors envision, but it should be generally supportive for the price of gold. It should help launch the price up and out of the huge inverse head and shoulders bottom on the long term gold chart. For the time being, the right shouldering process rolls on and investors should be eager accumulators.
- Please click here now. Double-click to enlarge. Next, please click here now. Double-click to enlarge. Both silver bullion and GDX look better than gold. Investors should focus on these assets during the final accumulation phase, and prepare for blast-off during Chinese New Year in early 2018!
Oct 3, 2017
email for questions: email@example.com
email to request the free reports: firstname.lastname@example.org
|Tuesday 22nd May 2018
Special Offer for 321Gold readers: Send an email to email@example.com and I'll send you my free “Surf The Seniors Surge!” report. I highlight ten senior gold and silver miners poised to rip higher for the rest of the year, with key buy and sell tactics for each great stock!
Updates Subscription Service: Note we are privacy oriented. We accept cheques.
And credit cards thru PayPal only on our website. For your protection
we don't see your credit card information. Only PayPal
|Subscribe via major credit cards
- or make checks payable to: "Stewart Thomson" Mail
to: Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario
L6H 2M8 / Canada
is a retired Merrill Lynch broker. Stewart writes the Graceland
Updates daily between 4am-7am. They are sent out around 8am. The
newsletter is attractively priced and the format is a unique numbered
point form; giving clarity to each point and saving valuable
Thomson is no longer an investment advisor. The information provided
by Stewart and Graceland Updates is for general information purposes
only. Before taking any action on any investment, it is imperative
that you consult with multiple properly licensed, experienced
and qualifed investment advisors and get numerous opinions before
taking any action. Your minimum risk on any investment in the
world is 100% loss of all your money. You may be taking
or preparing to take leveraged positions in investments and not
know it, exposing yourself to unlimited risks. This is highly
concerning if you are an investor in any derivatives products.
There is an approx $700 trillion OTC Derivatives Iceberg with
a tiny portion written off officially. The bottom line: