The Fed: Turning Gold Stocks Into Shooting Stars

The magnificent gold price rally has paused in the $1300 area for the past few weeks.  Monday was COMEX option expiry day. 

With that now out of the way, gold is already staging more upside action!

This is the daily gold chart.  A bullish upside channel breakout is in play and the consolidation was a flag-like pattern.

Also, note my key 14,7,7 series Stochastics oscillator at the bottom of the chart.  A buy signal that occurs in the 40-60 area is a momentum-oriented signal, as opposed to a value-oriented signal that occurs in the 0-20 area.

These are technical signs of a tremendously healthy market.

This is the spectacular long term gold chart. 

The technical excellence being showcased on the daily gold chart is typical during rallies from the final right shoulder low in this type of enormous inverse H&S bull continuation pattern.

I’ve been almost alone amongst gold analysts in suggesting that the brief five-year decline from 2011-2016 was a typical “ho hum” correction in a bull market rather than a “vicious bear market”.

There’s no question that junior gold stocks experienced a bear market then, but they have experienced a myriad of bear markets since the gold bullion bull market began in 1999-2002.

Gold bullion bull and bear cycles last a long time.  Twenty years is a short period of time for a gold bull or bear market, and many last a century or longer. 

I’ve predicted that this bull market will last a minimum of a hundred years, and more likely two hundred, and I stand by that prediction without wavering.

Most of the world has been in a deflationary cycle since 1980.  That’s when global bond yields peaked.  Gold stocks tend to crash repeatedly in a deflationary cycle along with stock markets.

In an inflationary cycle, gold stocks rally when stock markets rally… and they rally when stock markets fall.  In August of 2018 I told investors to get ready for a sea change event; I predicted global stocks would crash in September-October, and gold stocks would surge higher as the stock markets crashed. 

That’s exactly what happened then, and I’ll calmly predict that it’s going to keep happening for the next decade of time.

Silver bullion’s daily chart looks fabulous.

There’s a double bottom pattern in play with a solid breakout.  Note how the pullback stopped well above the $15 support zone.  That’s another sign of a very healthy precious metals market.

Key bank analysts are tuning into the solid fundamentals picture for silver.  “Supply growth has started to slow, more than for any other precious metal.” – John LaForge, Wells Fargo Bank, Jan 28, 2019.

Unlike America, China has tremendous “wiggle room” to stimulate its economy.  GDP growth can likely be sustained at 4%-6% for many years, while it’s likely to be sub 2% in America for a long time.  That bodes well for industrial silver demand, and Bloomberg analysts predict that demand will rise by 50% over the next 4-5 years!

India is in an even stronger position than China, and vastly stronger than America.  GDP growth is almost 8% now.  It could rise above 10% and it probably needs to, to provide jobs for all the young citizens entering the workforce every day.

This is the silver stocks ETF chart.  SIL is lagging GDX right now, and that’s technically positive; silver tends to lead as intermediate trends end, and lag as they begin and accelerate.

Goldman’s analysts feel the global GDP and earnings decline in play now will hurt silver demand, but I think they are underestimating the ability of the Chinese government to stimulate. 

They are also underestimating the anger of American blue-collar workers who were essentially deflated (and arguably conned) by the central bank with its QE program.  QE benefitted the banks, the stock market, and government.

Blue-collar Americans wanted tax cuts.  Corporations got a tax cut and the workers got nothing.  Now they want their own version of QE handouts, in the form of wage hikes.  Those hikes are going to happen as America enters a long period of GDP and corporate earnings stagnation.  That’s phenomenal news for silver stock and bullion investors!

This is the GDX daily chart.  Volume is positive, and the month-long consolidation appears to be ending.  A gold-positive statement from the Fed tomorrow should move GDX like a shooting star towards my next $23 target price!

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form.  Giving clarity of each point and saving valuable reading time.

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Stewart 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 qualified 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:  

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