Gold Price Reaction: Bulls Should Prevail

June 16, 2020
President of Graceland Investment Management

Gold investors are eager to see the current price reaction end and a fresh uptrend begin.Oscillator buy signals, rising volume, and bullish price patterns are beginning to appear in some gold stocks…and that’s a good sign.

The daily gold chart.The best word to summarize both the fundamental and technical picture for gold right now is ‘solid’.

There’s a nice bullish rectangle in play, and now a small inverse H&S bull continuation pattern has appeared within the rectangle.

That suggests an upside breakout could be imminent.

On the fundamental side, the US government is looking at a plan to use fresh borrowed and printed fiat to offer a bonus to citizens who go to work.

The government is also looking to use more borrowed and printed money for infrastructure projects.This type of borrowing and printing is inflationary.

The bottom line:QE for Wall Street is now being steadily augmented with QE for Main Street and that means… party time for “Gold Street”!

Tensions between major powers like China, India, America, Europe, Japan, and Russia are rising.As empire leadership transitions from America to China, tensions are likely to increase globally.That’s because many nations are affected by the transition.

America’s biggest period of growth arguably occurred during the 1870-1914 period, a time when globalization surged.Populism probably ended that super-boom, and the world’s citizens were ravaged by a world war of governments.

Populism is again on the rise around the world, because governments soaked in debt are racing to blame everyone but themselves for the problems created by their debt.

Horrifically, in America there are virtually no bomb shelters for citizens, and the government is currently borrowing vast amounts of money to manage what is arguably a modest pestilence crisis.

That money that should have been in a piggy bank, saved and ready to handle stormy days.

The next stage of the demise of the American empire is likely to involve war on US soil, war that is both civil and external.  It’s a frightening scenario, and one that cyclical analysis of war cycles suggests could become very real in 2021. 

The incredible silver chart.

Gold is the ultimate portfolio diversifier, and silver is the ultimate canary in the inflation mine.It’s clear that silver is acting with incredible strength at a time when a deeper reaction would be expected.

Note how quickly silver regained the neckline of the H&S top pattern on this chart.It’s also regained a key uptrend line.A long-tailed candlestick “iced the recovery cake” yesterday.

A rise over $18.50 would likely be an all-clear signal, and I think it’s going to happen.

The road to Zimbabwe 2.0 continues unabated, with the Fed announcing it will make its first open-market purchases of corporate bonds today, using printed fiat money to do it.

With key features like negative rates for senior citizen bank accounts, a horrifying graduated income tax, capital gains tax, property tax, lack of medical treatment for the poor, no bomb shelters for citizens, deranged thugs wearing police uniforms who are ordered to enforce a zillion ridiculous laws, race wars, a stock market that has become a “poster boy” for the Fed’s electronic photocopiers, government economic numbers propaganda, more failed wars (drugs and Corona), macabre “looter lives matter and dead shop owners don’t” tributes… it seems likely that America’s road to becoming Zimbabwe 2.0 is assured.

That means “Queen Gold” is assured of launching above the key $2000 price zone, ready to begin a rocket blast towards my medium-term $3000 target!

The “Prince of Assets” GDX chart. A break above $38 would usher in a rally to $45, but a decline under $31 could see a deeper reaction down to $24.

If key GDX component stock Barrick (GOLD-NYSE) can trade at $26 and Newmont (NEM-NYSE) can trade at $60, that would add tremendous weight to the case that a fresh leg higher is underway.

A big volume bar on an up day would help suggest the current reaction is over and GDX is ready to attack the resistance at $38.

Obviously, the gold chart is extremely supportive, and the technical action there suggests the bulls will prevail!

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form.  Giving clarity of each point and saving valuable reading time.

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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.

The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.

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