Gold: Book Profits Now

Gold has staged a fabulous rally from about $1220 to $1245. Using the December futures price chart, I’ve defined the $1300 - $1350 area as a spectacular profit booking opportunity for investors.

This is the gold chart.

I’m an eager gold bullion seller now, but I’m less eager to sell gold stocks or silver bullion. That’s because they have not taken out their February highs while “Queen Gold” has done so easily.

Gold has clearly been the leader. It’s been a great upside ride, and now it’s time for investors to book solid profits with a big smile.

I’ve been adamant that gold is on the cusp of a two hundred year “bull era”. It’s themed around the love trade in China and India. For that reason, core positions should not be sold, but short-term positions bought in the $1200 - $1250 area should definitely be sold aggressively now.

Investors who are nervous that they will miss out on more upside action should buy call options while selling some bullion. Call options are like lottery tickets; if gold surges above $1350 and runs to $1400, the call options will rise in value quite significantly.

On the other hand, if gold declines to either of my $1308 or $1280 key buy zones, the loss on the options is small, and the investor has plenty of dry powder to buy more gold bullion, ETFs, and futures.

Clearly, the deep-pocketed commercial traders are aggressive sellers now.

This COT report covers the action through last Tuesday. In my professional opinion, the commercial traders have probably shorted another 50,000 to 100,000 COMEX contracts since that report came out, and sold a significant number of long positions.

Amateur gold investors don’t need to sell as aggressively as the commercial traders do, but history suggests that investors who book modest gold market profits when the commercial traders are aggressive sellers tend to be making a wise tactical decision.

This is an interesting bitcoin chart.

I cover the entire blockchain asset class at www.gublockchain.com but gold bullion enthusiasts should take note of the fact that bitcoin price sales can sometimes be a leading indicator for gold price sales.

That’s another look at the gold chart. Note the huge volume that occurred at the November highs in the $1338 area. Commercial traders were aggressive sellers into that price zone, as they are now.

The rally was caused by the election of Donald Trump. It was destroyed by Modi’s demonetization announcement, and there are rumours that he may be planning “Demonetization 2.0”

In the big picture, demonetization is increasing Indian gold demand. Indians have always been more distrustful of government than most of the world’s citizens (and rightly so), which is partly why they buy so much gold.

Demonetization has only increased that distrust. Another round of demonetization would create a significant long term increase in demand for gold bullion. In the short term, demonetization is negative for demand, and for the price.

Do commercial traders believe more demonetization is imminent? Is that why they are such aggressive sellers into this rally? That’s possible, but I think their selling is related more to the simple fact that there has been no serious pullback since the rally began, and a pullback is overdue from a technical standpoint.

I’ve noted that I’m a seller of gold but not of silver. Silver is likely to pull back when gold does, but when that pull back is over I expect silver to stage a stunning advance.

Silver should easily outperform gold during this next stage of what I call the “bull era”. As gold rises above $1392 and begins an aggressive rally towards my $1432, $1470, and $1530 target price zones, I think silver could shock investors and rally towards its $50 area highs.

My personal plan of action is to buy silver and gold stocks with the proceeds of my recent gold bullion sales. I encourage the entire Western gold community to consider partaking in that plan, to some degree.

This is the fabulous GDX chart. A lot of gold stocks have arrived at my first upside target zone ($25 - $26 basis GDX), but I urge investors to keep profit booking very light and focus on building substantial gold stock core positions on all price weakness.

For GDX, it appears that the long consolidation zone between $26 - $21 that started in February is ending. As noted, I’ll be using any price weakness to allocate my gold bullion profits to silver and gold stocks.

Many senior and intermediate mining companies have significantly restructured, and a gold price of $1300 or higher is turning them into “cash cows”. I’ve declared the 20 year bear market of gold stocks versus gold to be over. Gold doesn’t need to rally to thousands of dollars an ounce to send gold stocks to new highs, given this restructuring and low oil prices.

A gold price of just $1500, if it is sustained (and I think it will be) could send GDX to a new high, as institutional investors race to get in on the “restructured mining companies” action!

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