| The biggest driver of major markets right now is the possibility of a US-China trade deal.
 
The US government’s wild launch of tariff taxes caused global markets to swoon in the first half of 2018. Gold and the Chinese stock market were hurt more than a lot of other markets.
Gold has done well with QE, QT, falling rates, and rising rates, but tariff taxes hurt the Chinese economy. That put a damper on the growth of Chinese gold demand.
The Chinese stock market is now rallying in anticipation of a trade deal, but even if there is no deal (unlikely), the Chinese government has embarked on a significant stimulus program.
US money managers are getting more interested in the Chinese stock market because of that stimulus. A trade deal that includes more intellectual property protection would create a huge US stock market rally. More importantly, it would create a huge rally in the Chinese market and that would increase gold demand significantly.
If the Fed hikes or signals that QT is going back to auto pilot mode, institutional money managers will buy gold because of growing concerns about the US government’s ability to finance itself, and because the Fed’s move would hurt low interest rate loans for US stock market buybacks. A situation like September 2018 would occur, with gold rallying and stock markets tanking.
On the other hand, a pause in hikes and an earlier-than-expected end to QT is also viewed as good news for gold.
Additionally, even without a trade deal, China’s economy is becoming consumer-oriented, and that means more imports and less exports. In turn, that means less need for the purchase of US government debt.
A trade deal would speed up this process.
The US government’s ability to finance itself without foreign government purchases of its bonds is becoming a significant concern for powerful money managers like Larry Fink of Blackrock.
The bottom line: A trade deal is good for stock markets and gold, but it likely flips the US government’s financial situation out of the fry pan… and into the fire!
Clearly, the current global-macro situation is extremely positive for gold. What about the technical situation? This is the daily gold chart.
It really doesn’t matter whether gold makes a beeline for my new $1400 target immediately, or whether there’s a “pitstop” in the $1300-$1280 support zone.
It doesn’t matter because the big picture fundamentals and technicals are outrageously positive, so there’s no need for fear amongst investors.
The higher-price implications of the technical action on this weekly gold chart are obvious. The $1000/ounce price zone is major support, $2000 is resistance, and $3000 is the target price!
The world’s need for dollars is declining, for a multitude of reasons. Whether it’s caused by the simple but gargantuan growth of the Chinese and Indian economies, or the US government’s “My way or the highway” approach to sanctioning Russia, bank and government entities around the world are steadily distancing themselves from the dollar.
Gold is the best way for individuals, banks, and governments to do that. The buy programs of emerging central banks are only in their infancy, and the tonnage being bought is consistently rising.
As somebody who aggressively bought the US stock market right into the October 2008-March 2009 lows, I can assure the Western gold community that there is no event to fear in the current gold market. The market is rock-solid.
The rise of the Eastern economies is a titanic force that is creating both de-dollarization and demand growth for gold. Citizens of the East view gold as the best investment asset from both a risk and reward perspective. Their view is now being adopted by more and more Western money managers. In time (and not much time), this positive view of gold will also be the view of the average American citizen. Gold bashers like Warren Buffett prospered in the fiat era, but that era is waning fast. A new bull era is being born and all roads lead to gold.
This is the interesting GDX chart. Merger-mania is underway in the gold and silver mining stocks and there’s “bull flag mania” on the daily GDX chart!
Larger gold mining entities are required to service the global demand growth for gold. I’ve predicted that Chinese miners, banks, and industrial companies will ultimately be involved in mergers with Western mining companies.
In the coming years, gold miners could become as important as the giant base metal miners.
That’s another look at the GDX daily chart, with the support zones highlighted. Mining stock enthusiasts should be buyers of their favourite miners any time GDX trades at a support zone.
Gold stock investors should understand that the current market is not like the early 2000s, 2007, or 2016. This is a market like the 1970s, and the upside fun… has only just begun!
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