The Fed & China: Rally Time For Gold

President of Graceland Investment Management
July 26, 2023

While tomorrow’s US interest rates announcement can help push gold to key short-term buy or sell zones, the big picture for gold is mainly about Chindian citizen demand versus mine supply.

Western gold bugs wait eagerly for BRICS governments to announce a gold-backed fiat to compete with the dollar. The citizens of China don’t have time to wait for governments who move slower than Godot when it comes to doing anything good.

Chinese citizens have already made gold their de facto personal currency and central bank. Here’s the bottom line: Demand for gold is surging in China and that’s putting a major floor under the price!

Chinese citizens are also the world’s biggest gamblers. A surging stock market puts investors in a joyous mood, and they celebrate by buying enormous amounts of gold.

Double-click to enlarge. A massive inverse H&S pattern is in play for the Chinese stock market.

The FXI is essentially the “Dow” of China. A surge from the right shoulder low could begin today and after some volatility around the Fed announcement, gold is likely to follow the FXI.  

In addition, if Jay’s speech is dovish, then gold, silver, and the miners could quickly look like Apollo rockets headed for a fiat priced moon!

China is ready to transform from a property-oriented economy into what is best described as a super-sized Silicon Valley. That’s going to put an even bigger floor of demand under the price of gold.

Double-click to enlarge. Oil is breaking out to the upside. My $93 medium-term target (at two converging trendlines) looks increasingly likely to be hit.

Surging oil means surging pump gas, and oil is also the biggest component of most commodity indexes and ETFs. Institutional buying there can drive up the price of other commodities.  

Meantime, the Fed is unlikely to change its increasingly dovish stance until after oil and food commodities have moved substantially higher. These items are viewed as “too volatile” to give an accurate picture of inflation… until US citizens start screaming that they can’t afford pump gas and food!

The dovish stance is silly, but it’s very good for gold.

Double-click to enlarge this fabulous weekly chart for gold. My 14,5,5 Stochastics oscillator is oversold and almost sporting a crossover buy signal.

In the summer of 2022, Stochastics also flashed a buy signal. It failed briefly, before flashing another one that ushered in a massive $400/oz rally for gold!

If this buy signal fails, the $1900 low is a magnificent entry point for gold, silver, and the miners. Because it’s a previous low, it’s also ideal for stoploss enthusiasts who can keep a stop at $1890, $1885, or $1880.

If gold instead surges to an all-time high (likely), the next big buy zone for gold market investors would be on a pullback to $1975.

Double-click to enlarge. The daily chart shows a big base/reversal pattern in play. It began forming in May and it’s almost certainly a product of both an increasingly dovish Fed and the increasingly massive Chinese citizen floor of demand.

A daily focus on the big picture is critical for investors as inflation, recession, the 2021-2025 war cycle, a wildly overvalued stock market, debt ceiling horror, and empire transition dominate the investing landscape. I cover this big picture 5-6 times a week with updates like this one, in my flagship Galactic Updates newsletter. At $199/year, investors feel the price is too low, but I’m offering a $179/15mths “special offer” that investors can use to get in on the winning action and meticulous analysis. Click this link to get the offer or send me an email and I’ll get you a payment link. Thanks!

The smart money commercial traders added a lot of short positions at the $1980 resistance zone. If most of them are covered off by the end of the Fed meet and announcement, and I think they will be, the “rally time for gold!” cake is likely iced. 

What about the miners? 

Double-click to enlarge this SIL chart. There’s a nice H&S bottom in play. Even if the pattern fails, basis Edwards/Magee the final low is near. Silver stocks look ready to soar!

Double-click to enlarge this incredibly positive daily GDX chart. 

At the April highs, the technical situation was essentially the opposite of what it is now; weekly chart oscillators were overbought (now they are oversold), and sentiment (basis the BPGDM) was also overbought. Now it’s oversold.  

Rather than cautionary as in April, overbought Stochastics on gold stock daily charts is bullish.

Also in April, the economic news and mood in China was negative, and the outlook for gold demand there was questionable. Now, a huge Chinese stock market rally looks imminent and the demand for gold is solid. The bottom line for mine stock investors is this: Buy this dip and be prepared for what could quickly become… a very golden lunar trip!

Thanks!

Cheers

St

Special Offer For Gold-Eagle Readers: Please send me an Email to [email protected] and I’ll send you my free “Get Jacked With J!” report. I highlight key GDXJ stocks that could surge after Fed man Jay’s speech this week! Both core and trading position tactics are included in the report.

Stewart Thomson

Galactic Updates

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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualified investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

Are You Prepared?

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Stewart Thomson is president of Graceland Investment Management (Cayman) Ltd. Stewart was a very good English literature student, which helped him develop a unique way of communicating his investment ideas.  He developed the “PGEN”, which is a unique capital allocation program. It is designed to allow investors of any size to mimic the action of the banks.  Stewart owns GU Trader, which is a unique gold futures/ETF trading service, which closes out all trades by 5pm each day. High net worth individuals around the world follow Stewart on a daily basis.  Website: www.gracelandupdates.com.


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