Gold In 2015: Twelve Winning Months?

Gold is off to a great start this year.  That’s the daily gold chart, and it looks superb.

The strongly bullish technical action reflects the positive fundamentals of the gargantuan Chinese and Indian jewellery markets.  Those two nations are the main price drivers of the “gold bull era.”

Gold is also attempting to stage an early morning breakout from a small drifting rectangle pattern, which is good news. The “Queen of Metals” tends to have strong rallies following the release of the monthly US Employment Situation report.  The next one is scheduled for Friday morning, at about 8:30AM.

Gold tends to be a bit soft going into the release of each jobs report, so this morning’s breakout should not be regarded as absolutely definitive.  There could be a bit more softness over the next few days, before a fresh intermediate trend higher gets underway.

Regardless, the target of the large ascending triangle in play is the $1350 - $1375 area.

While India and China are the main drivers of the gold bull era, holdings of Western ETFs have started to rise.  That’s adding some “spice” to the bull era.

That’s a snapshot of the SPDR fund holdings (GLD-NYSE).  The fund began the year holding about 700 tons.  It now has about 766.

As 2014 began, I predicted that gold would rally strongly on the taper, stunning the bank economists, and then trade roughly sideways, for the rest of the year.  I also suggested that SPDR fund holdings would decline from the 800 tons area, to about 700. 

That’s almost exactly what happened.  For 2015, I see a gradual rise in SPDR fund holdings, probably to about 900 tons.  Value-oriented institutions will likely replace action-oriented hedge funds, as the main ETF buyers.

I see much more gold-positive news coming out of both China and India in 2015.  If India chops the import duties in the upcoming budget (roughly scheduled for February 28), there’s a good chance that gold stages steady price advances against the dollar, during every single calendar month of this year.

Many readers have noticed that the price of gold tends to be stable in the early evening when China and India dominate the trading.  Then, at about 3AM New York time, as Asia goes quiet, gold often sells off, and sometimes quite violently.

Asian trading is jewellery-oriented, so the price action tends to be generally very calm, often with a mild upwards price bias.  In contrast, Western trading tends to revolve around anything but jewellery.  

There is some good news in play now, for those investors who believe gold should trade in a more stable manner, with a steady upside bias to the price action.

The entrance of Chinese banks into the LBMA price-discovery process is very good news, and should bring needed stability to the global gold market.

Gold is arguably already fundamentally stronger and more stable now, than at any point of time in world history, and silver looks even better.

That’s the silver chart.  I’ve used 8 hour bars, to add fine detail to the price action.

A beautiful inverse head and shoulders bottom pattern is in play.  The neckline is sloping.  Rather than single price points, I use target ranges for all patterns with sloping necklines.  

If you want to know why I do that, send me an Email to [email protected] and I’ll send you a brief explanation about setting head & shoulders pattern targets.

My target range for silver is the $20 - $22 area.  From the $14.25 area lows, a move to just the lower end of the target range would be a gain of about 40%!

That’s the GDX chart, using 3 hour bars.

From a technical standpoint, that chart is “drop-dead gorgeous”.   A bullish double bottom pattern has morphed into an even more bullish double-headed inverse head and shoulders bottom, with a target zone of $25.50 - $28!

A chop in the Indian import duties will add tremendous legitimacy to gold stocks ownership.  Here’s why:  Conservative institutional money managers like stability and consistency.  Huge amounts of gold currently move through the mafia-controlled black markets of India.  That’s not an environment that is attractive to mainstream money managers.

A sizable and permanent chop in the duties will dramatically reduce the role of the mafia in the world’s largest and most inelastic gold market.  Also, falling oil prices have reduced the cost of producing gold, for most gold mining companies. 

With lower costs on the supply side, and a free and legal market on the demand side, I expect Western institutional money managers will be steady buyers of the highest quality gold stocks, all through the next three quarters of the 2015 calendar year.   That should produce nicely higher prices for the entire sector.  Thanks for your time!

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