Gold Price And Silver Price Stagflation Implications

At the end of the year, I always urge investors to stand aside from the US stock market.  That’s because major money managers tend to move large amounts of liquidity during the first week of January, setting the tone for the year.

This year, the US stock market just put on what is arguably the worst first week of trading in the history of America!

I think that picture speaks about a thousand frightening words. 

Clearly, some of the world’s top economists are very concerned about the ramifications of Janet Yellen’s rate hike policy.

My own view is quite different.  Mine is that “Rate hikes rock!”   That’s because I’m firmly committed to the view that rate hikes will benefit main street America, while putting severe and rightful pressure on Wall Street and the US government.

US consumer spending, borrowing, and saving all appear to be rising, while overall GDP declines.  The Fed has begun to shrink its balance sheet, and wage inflation has ticked up. This is a very good situation, for gold price enthusiasts around the world!

That’s the daily dollar versus yen chart. 

The dollar has staged a major breakdown against the yen, and large FOREX traders tend to base their dollar-gold trades on the dollar-yen chart action, more than on movements in the overall dollar index (USDX).

That’s the daily gold chart.  In the short term, I expect the dollar to rally a bit against the yen, and that could push gold modestly down, to the $1070 - $1080 area.

From there, I expect the dollar to stage a major decline against the yen, creating a massive rally in gold. 

Right now, the yuan is declining against the dollar.  That yuan weakness is putting a lot of pressure on oil and global stock markets. 

That’s the daily oil chart.  Strong supply and drooping demand is quickly filling up available storage tanks.

If those tanks reach capacity, oil traders could panic, and oil could crash to the $15 - $20 area, and that would probably create a crash in global stock markets.  I expect the Dow to swoon again, but not until it stages a very powerful rally.

The yen and gold bullion will likely function as the world’s only safe havens, as Janet Yellen unveils more rate hikes, stunning most analysts.

As oil goes lower, and the Fed pushes money off its balance sheet and into the commercial banking system, main street America won’t exactly “glitter like gold”, but it will stage significant relative outperformance versus corporate Wall Street.  Consumers will both save and spend, and wages will rise. 

Ultimately, that’s fabulous news for gold stocks, but in the short term gold stocks may not shine as brightly as bullion. 

That’s the daily GDX chart.

Many amateur technicians have probably worked overly hard recently, in an effort to call “ultimate lows” and “fresh big declines” for gold and gold stocks.  The reality of the situation appears to be more mundane; most gold stocks did signal a rally for gold bullion, by refusing to confirm gold’s late 2015 decline below the summer lows.

That was positive news for gold, but gold stocks themselves are unlikely to stage any kind of “barn burner” rally, until Janet Yellen unveils more rate hikes and the Fed chops its balance sheet, making stagflation become widely recognized. 

The exception to this “rule” will be the South African miners, where the tumbling rand currency is becoming a major booster shot to company profits, and share prices. 

That’s the daily Harmony mining chart.  In less than two months, while GDX has barely moved higher, Harmony has almost tripled!

Many Western gold stock investors have bitter memories of mine-crippling strikes and theft, in the 1970s.  The bottom line is that was then, and this is now; China and India weren’t looking to secure long term supplies of gold in the 1970s.  They are doing so now. 

South Africa has many of the world’s big reserve mines, and even a modest recovery in the overall gold price would create substantial profits for many miners there.

What about silver?  In the short term, silver could slip a dollar or so, on the downside.  That’s because the “stag” part of stagflation (lower GDP and stagnant stock markets) is now apparent, but the “flation” (inflation) part of the equation requires more time to present itself.  I’ll dare to suggest that all silver price enthusiasts need to be aggressive buyers of any short term price weakness, because the winds of stagflation can grow in intensity, with shocking speed!

********

Special Offer For Gold-Eagle Readers:  Please send me an Email to [email protected] and I’ll send you my free “Short the Dow & Buy Gold Stock ETFs!” tactics report.  I highlight winning tactics investors can use, to profit from shorting the US stock market and buying gold stock ETFs, with specific entry and exit points!

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 does.  They pay us.  Minus their fee.  PayPal is a highly reputable company.  Owned by Ebay.  With about 160 million accounts worldwide.

Written between 4am-7am.  5-6 issues per week.  Emailed at aprox 9am daily.

www.gracelandupdates.com   

www.gracelandjuniors.com  

www.gutrader.com   

Email: [email protected]  

Or: [email protected]  

Rate Sheet (us funds):

Lifetime: $799

2yr:  $269  (over 500 issues)

1yr:  $169    (over 250 issues)

6 mths: $99 (over 125 issues)

To pay by cheque, make cheque payable to “Stewart Thomson”

Mail to:

Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada

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.

Risks, Disclaimers, Legal

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:  

Are You Prepared?