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1.The latest US jobs report has stunned most analysts,
with its dramatic weakness.Most investors in the Western gold community are
nervous about rate hikes, and this report supposedly gives the average gold
investor a little breathing room.
2.I beg to differ.In the current situation, rate hikes
are not bearish for gold prices.They're bullish, and here's why:
3.The Western commercial banks are sitting on huge
reserves of cash.They built those during the Fed's QE program.Money supply
increased, but velocity decreased, because low rates hinder bank profits.That
created deflation.
4.Deflation has continued, because the banks have no
incentive to loan out their enormous cash reserves, but I think Janet Yellen
plans to change that situation.
5.Many economists think potential rate hikes are a
result of the Fed responding to "strong US growth".There's no
question that the US is in an upcycle, but productivity is at 1930s levels in
the private sector, and much lower in the huge government sector.It's
important to understand the difference between economic recovery, and a
simple upcycle.The US is experiencing the latter.
6.Some analysts think rates will rise simply because
the Fed needs the ability to cut rates in the next down turn.
7.I think both of these rate hike views are 100%
wrong.Janet Yellen is not a hawk.She's a dove, and doves seek higher
inflation.The only sure way to create higher inflation is to increase the
velocity of the money supply.
8.That velocity can only be achieved, realistically,
through an increase in bank loan activity.Bank loans will only increase if
the banks can make large profits from them.The bottom line: Rate hikes are
coming, but the main purpose of them is to increase money supply velocity.
9.During a system risk event, money managers rush to
T-bonds and gold bullion, as they did when the Fed implemented QE1 during the
2008 meltdown.
10.In contrast, when inflation is created without
system risk, money managers tend to focus on..gold stocks.
11.Please click here now. Analysts at
CNBC have a slightly different view of rate hikes than I do, but they are
correctly focused on wage price inflation.
12.Unknown to these mainstream analysts, the elephant
in the inflationary room, is the giant "QE money ball" that the
banks are sitting on.When rates rise, the banks will likely begin a
gargantuan lending spree.Rather than tempering inflation, Janet's rate hikes
should exponentially accelerate it.
13.As that happens, I expect institutional money
managers to reduce US stock and bond market positions, and purchase gold
stocks.
14.On that note, please click here now. Double-click to
enlarge.That's the daily chart for Barrick Gold, and it looks superb.
15.Most investors are focused on the $1220 area for
bullion, but I think the Barrick chart is now the lead indicator for the
entire precious metals market.
16.Newmont lead the first rally of 2015 for gold
stocks, but Barrick is now poised to take the leadership baton, and lead most
gold stocks and bullion, to higher prices.
17.Watch the $13.30 area on that Barrick chart very
carefully.A move above that level could ignite a powerful rally in ETFs like
GDX-N, SIL-N, and GDXJ-N.
18.Gold stock enthusiasts should book light profits in
Barrick at $13, $14, $15, $16, and $17.They can use my unique pyramid
generator to do that systematically.
19.Please click here now. That's the
daily gold chart.If Barrick can surge above $13.30, I think gold will quickly
rise to $1255, and maybe to $1300.
20.For a closer look at gold, please click here now. That's the
hourly bars chart.A hedge in the yard needs to be pruned.Likewise, some gold
market profits need to be booked on rallies. So, I sold a bit of gold at
$1217, as it rallied towards overhead HSR (horizontal support and resistance)
in the $1220 area.
21.Gold's short term softness could continue today.It
may trade down to about $1203, and perhaps to $1195.Regardless, as the rally
in gold stocks accelerates, I expect gold to successfully move above $1223,
and rise to my next profit booking targets at $1240 and $1255.
22.Silver tends to outperform gold during rallies.Do silver
stocks tend to outperform gold stocks?I don't think so.In my experience,
silver stocks tend to perform about as well as gold stocks do during metals
sector rallies.
23.Simply put, investors who like gold should own gold
stocks.Investors who like silver should own silver stocks.It's not a question
of one asset outperforming another, so much as it is about personal feelings
for gold or silver.
24.Please click here now. That's the
daily chart for SIL-N, the silver stocks ETF.The blue downtrend line is now
support.My suggestion is to book light profits on trading positions at $9.27,
$9.67, $10.33, and $10.82.Use Barrick's price action as a key lead indicator
for silver stocks, and be prepared for rate hikes to create a shocking rise
in money velocity, and inflation!
Special Offer For Website Readers:Please send me an Email to freereports4@gracelandupdates.com and I'll send you my "Golden Cowboys!" report.I cover
ten GDXJ stocks that look set to rally nicely, and five that may swoon, with
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Thanks!
Cheers
st
Stewart Thomson
Graceland Updates
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Stewart Thomson is no longer an investment advisor.
The information provided by Stewart and Graceland Updates is for general
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