Gold Market Update: is this THE START OF THE BIG MOVE??...

Technical Analyst & Author
October 18, 2023

Gold had a really big up day on Friday and the central question for investors in gold silver and Precious Metals stocks is whether this was just a “flash in the pan” move that will not lead to anything significant or whether it marks the start of a much larger move. For reasons that we will come to it is thought to be the latter.

It is clear that at least a part of the reason for the big gain on Friday was panic covering by “dumb money” who had built up big short positions and got caught out by the intensifying problems in the Mid-East. Gold’s latest 6-month chart puts this move in context and we can see that it rocketed into a zone of quite heavy resistance near to the apex of the Triangle shown that it earlier broke down from, with the sharp drop creating a”bear trap” that the aforementioned dumb money shorts got sucked into. Technically, the magnitude of this move and the volume driving it strongly suggests that this is more that just a short covering rally and marks the start of a much bigger move.

The arguments against gold in the recent past are the obvious ones, which are essentially that how can it be expected to do well when both the dollar index and interest rates are advancing? While these arguments may still to some extent be valid over the near-term they are short sighted as they fail to take into account that the explosion of debt has now reached the terminal phase with wars being instigated in part as an act of desperation in order to provide an excuse to spirit trillions more dollars into existence with the National Debt now rising at a rate of a trillion dollars every 6 weeks or so. What this implies is either a catastrophic sudden credit lock up or a further exponential acceleration of debt Zimbabwe style into extreme hyperinflation. The latter is the line of least resistance, especially as the more debt Central Banks create the stronger they become, so we can expect this route to be the one that will be taken, and this being so even the most obdurate and stupid person ought to be able to understand that unbacked paper money will become utterly worthless and when this 40 Watt bulb lights up there is going to be the biggest stampede into gold, silver and other tangible investments that the world has ever seen. Given the now vertical and terminal expansion of debt this realization could come sooner rather than later and may even have started last Friday.

So let’s watch to see if gold can break out above the upper boundary of the Triangle – if it does the big move is probably on.

On gold’s 5-year chart we can see that it has been stuck in a giant rectangular trading range since the middle of 2020. There is a clear line of strong resistance at the top of the pattern approaching $2100 which is obviously very important so a conclusive breakout above this resistance will be a strongly bullish development that should usher in a major bullmarket advance, and given the impending collapse of the West and its doomed fiat money system this move is likely to be of epochal proportions.

On gold’s 20-year chart the rectangular trading range that has formed since mid-2020 looks like a potential top but in considering this chart we should keep in mind that just because the price is near to the top of it does not mean that it can’t fly off the top of it. Given that money creation continues to expand exponentially which means that hyperinflation is inevitable, it is hardly likely that gold’s nominal price in dollars will drop significantly – on the contrary, it can be expected to break out to the upside and ascend to unimaginable heights as the ordinary population heaps piles of fiat paper into wheelbarrows in order to go and buy a loaf of bread.

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Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com


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