Gold: The Intense Battle For $1370

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Published : February 27th, 2018
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For the past fifteen months or so, gold has repeatedly been turned back by immense technical resistance in the $1370 area.

This is the daily gold chart.

There have been three clear attempts to push through the $1370 area since November of 2016. The first two failed miserably, but the current move looks much more positive.

During the latest pullback from $1370, the bears have only managed to push the price modestly lower, to my key buy zone at $1310.

The gold price promptly leaped higher as soon as it touched that area. This is very positive technical action. If the bulls fail a third time (unlikely), investors should be aggressive buyers at my $1270 and $1240 buy zones.

This is the gold chart for a closer look at the current price action.

Gold is attacking the $1370 area from a symmetrical triangle pattern. Using the classic technical analysis promoted by Edwards & Magee, there is roughly a 67% chance of an upside breakout.

That breakout would push the world’s mightiest metal through $1370… and open the door for a rush higher towards $1420, $1470, and $1520!

This is the exciting dollar versus yen chart.

The dollar’s breakdown under the key 108 support area adds tremendous weight to the argument that gold is poised to surge above $1370.

Most Trump supporters are focused on his campaign pledges regarding immigration, tariffs, defence, deregulation, and tax cuts. Their focus is on growth rather than inflation. That’s a mistake.

Reduced immigration tightens the labour market, pushing inflation higher. Borrowing money to buy more bombs to expand an already-gargantuan military-industrial complex puts immense pressure on the bond market. Deregulation and tax cuts are also inflationary.

While these pledges are indeed positive for gold, my main focus has always been on his more “thunderous” pledges regarding dollar devaluation and a haircut for T-bond investors.

The dollar breaking 108 is a gamechanger, and the T-bond chart now looks like a train wreck. As bad as it looks now, this may be only the beginning of a bond market nightmare. The bottom line is that Jerome Powell could essentially drop financial nuclear bombs on that train wreck with relentless rate hikes, quantitative tightening, and small bank deregulation.

The current T-bond train wreck.

The T-bond has arrived in the 142 target zone area of the H&S top pattern and a modest rally is expected. Having said that, fundamentals make charts.

The negative fundamentals that Jerome Powell is set to put on the US government’s bond market table are going to put truly epic pressure on the government’s ability to finance itself.

Trump is a brilliant businessman, but even a child operating a hot dog stand should clearly see that the US government’s debt problem has no solution other than some kind of bond market default, dollar devaluation, and gold revaluation.

Trump is not concerned about the US debt problem, and nor should he be concerned if he’s a realist that knows there is no fix to the problem, only an end to it. An endgame that is incredibly positive for gold.

This is the GDX daily chart.

Legendary mining expert David Harquail is launching a major drive to make gold an asset owned by most Western money managers. He’s bringing in heavyweight speakers like Alan Greenspan and other key central bank experts to bolster his presentations to institutional money managers.

I’ve predicted that this would happen by the summer of 2018 as the Fed successfully transitions America from a deflationary vortex into a modest growth with significant inflation economy.

King World News has covered the dramatic increase in free cash flow of most GDX component stocks. “Super Dave” Harquail is likely to get a US M2 money velocity bull market wind at his back (thanks to the efforts of Jerome Powell’s rate hikes and QT) as he makes his institutional presentations that highlight both bullion and the miners.

If that happens, the Western gold community is very quickly going to be happily looking down at prices like GDX $32, $40, $55, $65, and even $100! Of course, that happiness can only happen if gold stock enthusiasts are prepared to take buy-side action right now in my key $23 to $18 GDX price range with a focus on their favourite individual miners!

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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.
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