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All the pieces are falling into place for the biggest gold bullmarket in
history and by the look of the long-term gold chart, it is set to start very
soon. The biggest reason of course is the accelerating demise of fiat. There
are many other reasons that we will be considering going forward, but the one
that looks set to trigger the immediate start of the bullmarket (and has
already since the move of the past 2 weeks is viewed as the initial impulse
wave of this bullmarket, even though it hasn’t broken out yet) is the Fed
chickening out of its “normalization” program, which was a joke anyway
becausethere is no way they can normalize the hopeless mess they have
created.. The markets called the Fed’s bluff and they very quickly
folded, establishing that they are now powerless.
A key point to make at this juncture is that the latest COTs for gold
looked bearish because there was an explosion in Commercial short and Large
Sec long positions to an at least 1-year peak, which many are taking to mean
that gold will fail again at the big resistance at the upper boundary of its
huge base pattern. But what may instead happen this time is that gold breaks
out anyway, perhaps after backing off a little first, and rockets higher,
with positions ballooning to well off the scale levels, which would hardly be
surprising since if gold breaks out above $1400 a huge number of investors
and traders will come down off the fence and pile in. When they have reached
wild extremes on a spike, then we will see a correction or at least a
consolidation before the next upwave starts. We have learnt from a mistake
made early in 2016 when we called the end to the strong rally in progress
then off the lows of the giant complex Head-and-Shoulders pattern too early
due to high Commercial short and Large Sec long positions.
The main purpose of this update is to emphasize two crucial points. One is
that the sharp rally in the Precious Metals over the past 2 weeks is
considered to be the start of a “breakout drive” that will soon bust gold
through the key resistance towards and at $1400, a development that will
probably trigger a spectacular spike. The other is that the seemingly bearish
looking COTs won’t stop it – there be a minor short-term reaction but other
than that gold is looking set to blast higher soon. It’s hard to see how it
wouldn’t with the Fed’s reversal to dropping rates set to rip the rug out
from under the dollar, and the global move to dedollarize given added urgency
by the recent spate of bullying and crude threats issued to the rest of the
world from the US in the form of sanctions, tariffs and possible military.
The US Neocons would do well to heed the old saying “People who live in
glasshouses shouldn’t throw stones” – the key to neutralizing them is to
dedollarize, collapse the dollar and starve the US military – industrial
complex of the torrent of foreign funds that it depends on for its power. The
rest of the world knows this and, after making sure that they are able to
defend themselves militarily (in the case of the major powers), are taking
steps to dump the dollar and push it off its perch. This of course will be a
huge driver for gold, especially as most other currencies are also in a
parlous state.
Let’s now quickly review the latest most pertinent charts.
Starting with the 10-year gold chart we see that it is at last in position
to break out of its gigantic 6-year long base pattern, that may be described
either as a complex Head-and-Shoulders base or as a Saucer. The sharp rally
of the past 2 weeks is viewed as the probable start of a “breakout drive” out
of the pattern, and it will not be stopped by the seemingly bearish COT even
if that triggers a modest reaction (possible because June is not a seasonally
good month for the Precious Metals). However, we should not be put off by
this because any such dip will be like the side of a molehill compared to Mt
Everest.
 
Click on chart to popup a larger, clearer version.
Since a dollar collapse will be a primary driver for gold, how does the
dollar look? On its 10-year chart we can see that the rally of the past year
or so caused by the Fed’s normalization program is fizzling out as the Fed
has been backed into a corner (backed itself into a corner) and has been
forced to capitulate. We are now on course for 0% interest rates or lower –
think about it – what would you rather hold in a NIRP environment where banks
help themselves to your cash via bail-ins, which is reality plunder, cash or
gold that they can’t touch? – it’s a no-brainer.
Silver investments look most attractive at this time, as silver is still
close to a rock bottom price and it tends to lag gold.
We will be expanding on the reasons for a massive bullmarket in the
Precious Metals going forward.
End of update.
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