Gold & Oil: Managing The Narrative
The “Rising oil means the Fed might hike rates so gold must fall!” narrative is in play. It works… until it doesn’t.
There are oil price and inflation numbers where citizens begin to panic-buy gold, but what those numbers are is currently unknown.
As long as the (false) narrative holds, falling oil prices benefit gold.
On this chart, a H&S top is evident, but there’s no guarantee it plays out as is technically indicated.
This is the “scenario #2” chart for oil. The bottom line:
Whether oil goes higher now, or later, the main point is that it’s almost certainly going… much, much higher.
American citizens don’t face the same fuel shortages risk that Asian and European citizens do, but because oil is priced globally, they face similar risks of inflation… albeit with a lag.
Because the oil-gold-rates narrative carries so much weight amongst bank algo traders and institutional money managers, savvy gold bugs need to be sure they have enough fiat on hand to emotionally manage the swoons in gold, silver, and mining stocks that the narrative can create.
Gold is likely going to $20,000, but it’s not going there in a straight line. When there are swoons in the price, there can be significant swoons in the emotional state of a gold bug whose allocation to the market is out of sync with who they really are.
For the past couple of weeks, I’ve suggested that on the daily chart… the bears are in control.
There are four technical factors in play (which thankfully are all short-term). The first is the RSI oscillator’s inability to push forcefully through the 50 zone. The second is the formidable resistance at $4900.
The third is the sell signal on the key 14,7,7 Stochastics oscillator. It has yet to reach the oversold zone.
The final “brown shoot” involves the important 20,40,10 series MACD indicator. The latest buy signal barely put the histograms over the zero line, and it’s been fading badly since then.
Tactics? My instructions for investors are simple; buy either the $4100 and $3900 zones (or both), if the current decline sees the price drop that low.
Modest selling can be done around the $5400-$5600 highs.
As the US government’s debt situation worsens and its obsession with fiat intensifies, it will become more desperate as more nations and institutions dump its bonds. That means new narratives will emerge about why gold will fall. For gold bugs, fiat is insurance.
Gold is money and fiat is insurance to manage new narratives that produce new short and medium-term swoons in the price of gold, silver, and miners.
For a look at a key weekly chart for gold:
The weekly chart action is much more positive than the daily, and it usually carries more weight for price projection.
The 14,5,5 Stochastics oscillator is flashing a buy signal and a huge flag-like drifting bull rectangle is in play. The recommended tactics are the same as for the daily chart; the $4100 and $3900 zones are for buying, and $5400-$5600 for selling.
What about the miners?
This is the long-term CDNX chart. I projected a multi-month pause as the most likely scenario as the index rose to the neckline of its gargantuan inverse H&S pattern and that’s in play now.
Investor patience is required but when the breakout occurs, the ensuing surge could be one of the greatest in the history of markets! Junior mine stock investing isn’t for everyone, especially with size, but as this gargantuan gold bull era rollout continues, these miners look set to outperform everything! At $199/year, my junior resource stocks newsletter is an investor favourite, and I’m doing a special pricing this week of $169 for 14mths! Send me an email or click this link if you want the special offer and I’ll get you onboard. Thanks!
For a look at the seniors via the GDX ETF:
The Stochastics oscillator has still not reached oversold status, so senior gold stock investor patience is also required. The buy zones for the senior miners are the same as for gold, $4100 and $3900.
As noted, gold is money and fiat is insurance. All gold stock enthusiasts need to ensure they have enough fiat to comfortably buy their favourite miners in these key zones, and view $5400-$5600 as a place to book big profits and sit in what is really a gold bull era throne!
Thanks!
Cheers
St
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Stewart Thomson
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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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