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"Gold Versus The Yen"

President of Graceland Investment Management
August 15, 2017

For gold to perform well against the US dollar, it needs to perform well against the Japanese yen.

Since 2011 gold has traded sideways against the yen.  Since 2013 it has been coiling in a very positive symmetrical triangle pattern.

An upside breakout would usher in a major move higher for gold against both the yen and the dollar.

Since 2013, the Indian market has been dealing with major duty, import rule, and hallmarking issues.  The process has weighed on demand since 2012.

India’s gold market has undergone an enormous restructuring in response to these issues.  The good news is that the restructuring is essentially complete now.

That paves the way for higher imports on a much more consistent basis.

China has made significant progress in tying gold price discovery more to physical demand versus supply.

Trump has also had major success in pushing the dollar lower against most of the world’s currencies.

These are not just one-time events.  Events like tension in Korea can move gold $20 - $50 in a short period of time.  A $100 - $200 move is possible if the tension intensifies (which it hasn’t).

Unfortunately, these gains are no more sustainable than the gains from the 1980 Russian invasion of Afghanistan were sustainable.

When the tension subsides, all the gains from these one-time events tends to be lost. 

To move $1000 higher or more, gold needs to see a quasi-permanent ramp-up in the physical market demand against static or limited supply growth, and that’s happening right here, right now.

Trump’s actions on the dollar are a long-term process.  He is now beginning a trade war with China.  From a gold price discovery perspective, this is vastly more important than tension involving Korea.

This is the gold chart.

Gold looks fabulous.  After rallying about $90, gold is consolidating its gains.  A new minor support zone at $1260 - $1280 is in play.  Both traders and accumulators can be buyers in this support zone, in anticipation of a sustained rise above $1300.

This is the daily chart of the Dow.  If the US stock market suffers a major crash in September or October, there tend to be “cracks in the dike” in August.

That’s what’s happening now.  The uptrend is still intact, but getting tested.  The next technical event to watch for is an RSI non-confirmation.  This happens when the Dow makes a new high, but the RSI oscillator (shown at the top of the chart) does not.

Investors can lighten up in August and essentially take a two month stock market holiday.  That’s what I do.  It reduces emotional stress. 

My focus is more on the Asian stock markets than America, and I’ve sold about 30% of my positions into this price strength.  If there is a crash, investors can buy aggressively, with a focus on banks and Asian markets.

Asian consumers carry debt that is similar to US citizen debt, but they have a lot of savings and strong saving rates as a percentage of income.  US citizens have almost no savings and abysmal saving rates. 

Asian markets will rebound from any crash with the resiliency shown by US markets during the late 1800s.  In contrast, US markets are in danger of descending into a stagflationary gulag if they crash.  I’m a buyer of US markets if they crash, but not with much risk capital compared to my Asian market allocation.

A number of influential money managers are following GDX right now, including Jeff Gundlach.  The triangle formation they are following is important, but what is more exciting is the bullish volume action.

Volume is rising on rallies within the triangle, and ebbing on declines.  That’s very positive.  Bullion and mining stock investors should be very comfortable right now.  Technical breakouts appear imminent and fundamentals are strong!

Special Offer For Gold-Eagle Readers: Please send me an Email to [email protected] and I’ll send you my free “Seniors Super Seven” report.  I highlight seven of the world’s top senior gold producers with key buy and chart breakout points!

Thanks! 

Cheers

St  

Stewart Thomson 

Graceland Updates

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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:  

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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.


Gold was first discovered in U.S. at the Reed farm in North Carolina in 1799, a 17-pound nugget.
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