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With things shaping up so well for gold, we can certainly take any
short-term correction in our stride, and more than that, we can seize upon it
as an opportunity to build positions further across the sector, whether by
means of ETFs, stocks or options, and of course, gold itself.
Several factors suggest that a modest short-term correction is likely
before the major breakout occurs. Gold is overbought after its recent runup
and is rounding over beneath the major resistance approaching $1400, as we
can see on its latest 6-month chart below. Thus, the appearance of a
short-term bearish “shooting star” candlestick on its chart on Friday coupled
with its latest COTs showing Commercial short and Large Spec long positions
hitting rather extreme levels suggests that it is likely to react back over
the next week or two to allow things to cool for a bit before the major
breakout occurs. The current COT structure IS NOT regarded as bearish
overall, because we would expect speculators to pile in at the start of a big
move – positions can be expected to get much more extreme once the big
breakout occurs, flying off the charts and staying high as the 1st major
upleg of the new bullmarket unfolds.
 
Click on chart to popup a larger, clearer version.
Fundamentally, the compelling reasons for a major gold bullmarket are
coalescing fast. After putting a sticking plaster on the system for the past
10 years by means of “Quantitative Easing” – stop and think about this term
for a minute, someone was obviously charged with the task of “putting
lipstick on a pig” by coming up with it, what they really mean is State
counterfeiting – if you did what they have been doing in your backyard,
printing money, you would risk ending up in jail – they have done it on a
much grander scale and are still free to walk the streets – that plaster is
now coming off and things are now unravelling fast. The Fed’s attempt to
return to relative normality by raising rates and scaling back their bloated
balance sheet quickly came off the rails, leaving them as impotent
bystanders. They have abandoned ship and we are now staring at the prospect
of QE on an even grander scale than hitherto coupled with NIRP (Negative
Interest Rate Policy), as the masters of the system move from pillaging the
populace by means of interest rates way below the real rate of inflation to
outright grand larceny in the form of bail-ins (theft of funds from bank
accounts) and negative interest rates. Needless to say, negative interest
rates just by themselves are going to make gold look like a very attractive
alternative to stashing cash in the bank and getting fleeced, and quite
obviously, the trend towards zero and even negative interest rates will
remove support for the dollar which will tank, providing a powerful tailwind
for gold which has been held in restraint over the past year or so (at least
against the dollar) partly by the dollar’s rally on the back of rising rates.
The combination of QE and NIRP are just one factor, albeit a big and
important one, that will drive gold higher. There are others, like the fact
that Central Banks are buying gold at a record rate. They know that the
writing is on the wall for the doomed fiat system and that gold will hold its
real value no matter what. That’s why they are stashing gold away as fast as
they can. In addition, there is a larger geopolitical reason for bigger more
powerful countries like China and Russia to accumulate gold, which is that if
they are to push the dollar off its perch as the global reserve currency – a
necessary step to take the wind out of the sails of the predatory US Military
– Industrial complex, which has a nasty habit of starting wars to achieve its
geopolitical objectives – then they are going to have to find alternatives to
trading in dollars, and to the SWIFT system etc. and be able if they wish to
back their currencies with gold. Their move in this direction is what makes
the current situation so dangerous, because the US Neocons are not going to
take this lying down, which is why they are trying to a stoke a war with Iran
– they reason that they have better odds of tipping the geopolitical scales
in their favor if they get a conflict going now than if they leave it until
China has become a lot stronger, and the recent incidents involving tankers
near to the Persian Gulf are obvious “false flag” events which a compliant
media are blaming on Iran. This also explains the trade war with China, which
is a blatant attempt to “throw a spanner in the works” of the Chinese economy
– they couldn’t care less about their own citizens’ standard of living dropping
significantly due to big price increases for a wide range of everyday goods.
According to recent surveys the Military is the one government
organization that US citizens still trust and apparently take pride in. This
is nice to know considering that they are forking over nearly $1 trillion
dollars a year of their hard-earned cash to fund it. Many years ago the
Military learned the propaganda value of putting on colorful parades and
displays to amuse the masses, but nowadays it goes much further than that;
the Military are intimately involved with Hollywood and basically help
filmmakers in creating dramatic and often expensive special effects involving
hardware and pilots etc. in exchange for being portrayed in a positive light,
and this has paid off in spades in terms of their public image. A classic
example that always gets top billing at the Dr Goebbels Institute of
Propaganda film festival is the blockbuster “Independence Day”. This film is
a real treat for students of brainwashing and propaganda and is a marvel of
political correctness – the world is saved by the US military, and
specifically by the teamwork of an athletic handsome black pilot and a
mastermind Jew. The General is an affable tough guy and the President just
happens to be a dashing ex-pilot who gets stuck in flying planes – maybe this
is where George W Bush got the idea for his "Mission Accomplished"
stunt on a carrier after the invasion of Iraq which looked like it was on the
high seas but was actually about 1 mile off the coast of San Diego with the
cameras all pointing out to sea. This film is very entertaining, as it should
be given how much it cost, but it was certainly money well spent from the
standpoint of the military.
Another reason why the US wants to attack Iran becomes clear when you
understand that China has created a system whereby it can buy oil outside of
the US dollar system, by making direct payments in Yuan convertible into gold
and this is already a reality because a Yuan denominated crude oil futures
contract started trading last year – and where does China get a lot of its
oil from? – you guessed it, Iran. This move by China is a serious and direct
threat to both the dollar and the Treasury market, especially as China is the
world’s biggest oil importer so a lot of oil money is going to go into the
Yuan and thence to gold, instead of dollars which will be a massive driver
for higher gold prices. So you see, the Neocons have a compelling
geopolitical reason for attacking Iran, as they see it, that goes beyond the
top priority of pleasing Israel, which is to both punish Iran for trading
outside of the dollar system and to shut off its oil supplies to China,
enabling them to damage China further. Even rabid warmongers like John Bolton
understand that a ground war in Iran is a non-starter, so they will probably
settle for bombing it back to the stone age by wrecking its infrastructure
and oil terminals and port facilities etc, which is their standard way of
dealing with any country that seriously opposes them. It remains to be seen
whether China and Russia will stand by and watch if this happens or whether
they will mobilize to defend Iran – if they do we will be looking at World
War 3, and come to think of it, it’s high time we had another major war – and
perhaps after it we won’t have to put up with endless nostalgic ceremonies
about the Battle of the Bulge, D-day, Dunkirk, Iwo Jima and Pearl Harbor,
Verdun etc, because they will have more recent conflicts to celebrate. If
conflict with Iran erupts then it will be difficult if not impossible to ship
oil through the Straits of Hormuz, which will cause a cathartic spike in the
oil price because a third of the world’s oil passes through these straits –
and in the gold price, and the US won’t mind this so much because it is now a
big oil producer.
Another factor that will be a big driver for more QE on an epic scale will
be political pressure from the Millennial generation in the US. This is the
generation that has grown up with an “entitlement mentality”, but
unfortunately, after the gross indulgences of the “boomers” and the cynical
self-serving ravages of the Neocons and their cronies have left the economy
as a debt-wracked house of cards, they are finding that their almost
worthless production line college degrees don’t guarantee them much more than
a legacy of debt and a career as a burger flipper, and that’s only until the
robots take over. So they have given up on the normal aspirations of making a
home and working to accumulate capital etc, and instead you see them everywhere
playing incessantly with their cellphones and taking cheap flights to places
where they can take loads of selfies to impress their virtual friends, in
short living as permanent adolescents. When times get a lot tougher they are
going to DEMAND that the government takes action and prints a lot more money,
and when we combine this with the dollar’s looming crash caused by the loss
of its reserve currency status it is easy to see how the economy of the US
could end up one day like Venezuela or even Zimbabwe.
Worldwide, fiat is now inserioustrouble as its endgame nemesis
approaches, with the outlook for the dollar actually being worst of all,
because of the magnitude of dollar based debt and its impending loss of
reserve currency status. The coming panic and chaos willforcea return
to fiscal prudence, and that must mean a reset and return to a gold standard.
This is another reason that countries that see this coming, like China and
Russia, are stashing away gold as fast as they can.
Finally, we will end by reviewing again the increasingly fascinating – and
indeed awesome – long-term 10-year chart for gold. This shows that,
notwithstanding any minor short-term reaction over the next few weeks, gold
is about ready to break out of its gigantic 6-year long base pattern, which
has taken the form of a complex Head-and-Shoulders bottom / Saucer, into a
bullmarket that is expected to be spectacular and dwarf all previous ones,
for the compelling reasons set above.
The expected near-term minor PM sector correction will be the occasion for us
to focus on more specific investments across the sector, in ETFs, stocks and
some options for those looking to leverage gains.
End of update.
https://www.clivemaund.com
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