Dec 6, 2016
- Institutional money managers move gargantuan amounts of gold market liquidity. Their fundamentally-based actions create the chart patterns that technical analysts use to try to project the next rally or decline in the gold price.
- On that note, please click here now. Double-click to enlarge this key daily bars gold chart.
- Note the three big fundamental events that I highlighted on the chart. The Brexit, US election/Indian fiat call-in, and the Italian referendum were all predicted by most analysts to boost the price of gold. The sad reality is that gold went nowhere or tumbled after each of those events.
- On the eve of the US election, I warned the world gold community that gold was very vulnerable to a major sell-off, partly because it traded near major sell-side resistance at $1320. What happened?
- Gold promptly stunned the gold community and tanked from there, as the Indian fiat call-in overwhelmed the US election news.
- So, what now? Well, another major fundamental event is now in play, as of Monday December 5, 2016. Please click here now. The Shariah Gold Standard was just approved!
- Please click here now. Details of the standard are being released at this week’s annual World Islamic Banking Conference in Bahrain.
- The bottom line is that gold is set to get a major boost in demand from 25% of the world’s population who are part of the Islamic faith.
- The world gold council estimates the boost could be as much as 500 to 1000 tons, which would make the Islam religion a major factor in gold price discovery for decades to come.
- Champions adapt. They prosper by adapting. So, gold community citizens need to adapt to the new gold market normal. That means they need to move, somewhat, from mainly a fear trade focus to both a fear trade and love trade focus.
- To repeat: champions adapt. On that note, please click here now. In regards to gold demand, I think that most analysts are understating the positive events taking place in India, and overstating the negative ones.
- Top Goldman economists are predicting that India not only rebounds from the current downturn caused by the fiat call-in, but prospers from it. Goldman is predicting India will grow at a mind-boggling 8.6% GDP growth rate through March 2018.
- I think it’s important that all world gold community citizens understand that the actions of the Indian government will make gold less of an overall percentage of income spending than it is now, but overall gold demand will still grow.
- Higher gold demand, from the Sharia Gold Standard, China, and India should boost the price of gold stocks… in a major way.
- To view the daily bars GDX chart, please click here now. Double-click to enlarge.
- In the short term, the upcoming Fed meeting is likely going to be the catalyst for a nice rally towards my $1230 – $1245 target zone for gold, and to $25 for GDX.
- In my professional opinion, most gold investors are making far too much effort to put bull market and bear market labels on gold. In the big wealth building picture, it’s fundamental news that creates major support and resistance zones that matters, not bull or bear market labels. In the new world of gold, bull and bear market labels are about as useful as a rotary phone.
- Support created by key news must be bought, and resistance must be sold. I sold into $1320 because it was major resistance created by major fundamental news. It’s that simple.
- The current price area of $116 – $1170 is a modest buy zone, and nothing more. In time the Sharia Gold Standard will define the next key support zone of size. It may be here, or at some other price. Investors need the patience to let Sharia-oriented fundamentals create the next major technical buy zone.
- The world is transitioning from deflation to inflation, and the key to vastly higher gold stock prices is a combination of increased love trade demand and a reversal in global money velocity.
- To ramp up money velocity, bank loan activity must increase substantially, and that’s starting to happen. Please click here now. I’ve argued that the world’s most important charts are monthly gold charts that show major support and resistance zones.
- In the shorter term, the most important charts are money velocity and bank loans. This Asian bank loans chart shows a fabulous bull wedge pattern. Morgan Stanley just upgraded HSBC from an “underweight” holding to “overweight”, based mainly on loan growth prospects.
- Where there’s a loan growth spark, there’s a money velocity upside flame. Where there’s a money velocity flame, there soon follows an inflationary fire!
- Attention US dollar watchers, please click here now. Heavyweight Wells Fargo analyst Jim Paulsen notes that five out of five major rate hikes have resulted in a lower dollar. I’ve noted that rates rose throughout the 1970s and inflation and gold soared as that happened. Last year’s rate hike was followed by a collapse in the dollar against both the yen and gold. Please click here now. Double-click to enlarge this dollar-yen daily chart. The dollar is quickly approaching major resistance at 116. The upcoming Fed meeting could be the catalyst that launches the next gold price rally, and does so as Sharia and Chinese New Year buying come into play. The 2017 calendar year is looking very good indeed, for the entire precious metal sector!
Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.
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