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The world’s most awesome asset is taking the world gold community into the new year with grand style. Gold has stunned most analysts and roared to my $1310 target price without missing a heartbeat!
The bull wedge pattern is both majestic and powerful. The ultimate price target of this pattern is a minimum price of $1350 and arguably as high as $1490.
When “QE to Infinity” and the death of the American economy was accepted as “the new normal” in both the gold and mainstream communities, I argued vehemently against that view.
Instead, I laid out an intense scenario involving an imminent multi-year process that would involve a taper to zero, relentless rate hikes, quantitative tightening, and ultimately a massive reversal in US M2V money velocity.
I’ve predicted this reversal will create a powerful bull cycle in gold and silver stocks, making them one of the best performing assets on the planet.
I think many gold investors are underestimating just how little inflation it really takes to create an institutional panic in US stock and bond markets.
I’ve predicted that this inflation likely happens by mid-2018. Clearly, institutional investors view even a modest rise of inflation as a major concern, if not outright panic. This is the type of statement that entices institutional money managers to buy lots of gold, silver, and mining stocks.
They like to see consistent price appreciation with reasonable volatility, and a modest rise in inflation is exactly what the doctor has ordered to make that happen.
I realize that the election of President Trump has been wildly celebrated by many gold market investors. They are fed up with the endless socialism and war mongering policies that have hallmarked recent administrations, but I would caution investors that presidents don’t change the nature of business cycles.
The policies that presidents enact tend to slightly limit or magnify the business cycle, but most of what happens in business is not related to the actions of the president. It’s related to inflation, wages, interest rates, corporate earnings, demographics, and stock market valuations.
There has been a sudden focus in the gold community on US GDP growth being “set to rise” under Trump. In contrast, like myself, most institutional investors are now focused on the rise of inflation in this late stage of the business cycle.
This inflation tends to appear suddenly and can cause great harm to stock market investors. At the current point in the business cycle, tax cuts without government revenue cuts are inflationary. Imminent bank deregulation is also inflationary.
The bottom line for President Trump: From a fundamental perspective, almost everything he is doing can boost growth in the next business cycle, but it will boost inflation more than growth at this stage in this cycle.
Around the world, the situation is similar. The government in India is taking action that should boost growth, but boost inflation more than growth.
Inflation is also beginning to pick up in Japan, and the end of QE there could move enormous amounts of capital out of the deflationary hands of the central bank and into the inflationary hands of the fractional reserve commercial banking system.
This is the fabulous silver chart.
The fact that silver acts and feels timid at the point in the rally is good news. It tends to lead gold near the end of major rallies, and I’ll suggest that this inverse head & shoulders bottom pattern indicates that a major upside inflationary scenario is just beginning. Note my medium term $21 - $22 price target.
Silver investors should be going into 2018 with a feeling of great confidence, because this mighty metal tends to get serious amounts of institutional respect when inflation moves higher. For all investors, silver bullion and leading silver stocks should be a key holding now.
This is the ominous dollar versus yen chart. Major FOREX investors flock to gold and the yen when risk in stock and bond markets grows. I believe the head and shoulders topping action on the dollar relates to institutional concern about inflation. This price action is great news for gold investors around the world.
Blockchain (crypto) currencies are consolidating their recent spectacular gains against the government fiat bubble currencies. Blockchain currency is newer, fresher, and better than fiat, and the current consolidation in the sector is very healthy. I was happy to see Mr. James “Gold Is Money” Turk recently call government fiat a bubble against blockchain. He’s a highly respected man whose views carry weight in the gold community, and it’s great to see him join the “Fiat is the bubble, not blockchain!” team.
I highlight the crypto currencies on the move with my www.gublockchain.com newsletter. Ripple is a key currency with major institutional backing. That makes it a solid holding for me. Note the classic bullish technical action occurring on this chart. Volume rose as ripple rallied, and declined as the price softened. Both the price and volume have been quiet over the holiday. Ripple appears poised to surge higher imminently, probably to my five dollar target price zone.
This is the great GDX chart. As inflation rises modestly at first, and then enough to create a stock and bond markets crash, I expect GDX to deliver bitcoin-style performance to the upside.
In the short term, the GDX price action is technically powerful. In the long term, I think relentless inflation will help Chindian citizens fall in love with Western gold stocks. While it will take time, that love affair should drive GDX to at least $5000 a share, and perhaps to as high as $20,000.
Any right shouldering action that occurs in GDX now is likely to be at a price area well above the left shoulder lows. There’s a flag-like pattern in play as well. This is a truly awesome start to the year for gold, blockchain, and the entire anti-fiat family of assets. My warm wishes go out to all investors, as they prepare to enjoy a very special and profitable year in the gold market!
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