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1. In the theoretical world, gold stocks are a
fantastic bargain. In the theoretical world, gold and silver bullion are on
sale at “once in a lifetime” prices.
2. In the real world, gold investors (you) have bought
the gold stock sales repeatedly. Instead of entering a world of sugarplum
stock prices in the sky, you’ve been thrown into a gold stock gulag.
After years in the gulag, instead of releasing you, the guards have dropped
you through a trap door into a dungeon.
3. To top it all off, things could get much worse
before getting better. I warned the gold community not to wish too hard for a
collapsing bond market, because you just might get it.
4. Unfortunately, I don’t think most investors
have taken the falling bond market very seriously, particularly in regards to
the ramifications for the gold price.
5. To view the Barclays 20+ year treasury bond fund
monthly chart (TLT-nyse), please click here
now. The good news is that strong HSR (horizontal support and resistance)
sits near the current price.
6. Click here
now to view the three MACD series that I run for the same TLT monthly
chart. The picture painted by “Sir MACD” is very nasty.
7. When inflation is rising rapidly, the Fed will raise
interest rates dramatically to combat that inflation.
8. It takes time for rising interest rates to cause the
rate of inflation to fall. In the meantime, the price of gold can rise
dramatically higher. That’s not what’s going on here. At the
present time, institutions believe that rates are rising because of economic
strength that has been surprisingly strong.
9. I’m a little worried that gold investors may
have put a bit too much effort into trying to deny the picture that
institutions have of the major markets. When rates rise while inflation is
officially considered to be tame, as it is now, institutions can sell gold very
aggressively.
10. Unfortunately, most institutional money managers
don’t care what the shadow rate of inflation might be. They care only
about the growth and inflation numbers that are released by the government.
11. All options have always been on the table since the
gold price entered the $1500-$1900 trading range. Gold is definitely oversold
now, and a strong wedge pattern is solidly in place. Gold could rise hundreds
of dollars higher from here, but it could also fall hundreds of dollars lower
if the bond doesn’t reverse course.
12. The only financial question that really matters is
whether you are strong enough to endure whatever price surprises this crisis
has in store for you. There are many more surprises ahead, and most of
them will be very unpleasant.
13. The winners in this crisis will be those who can
endure their way to the end, and the losers will be those who try to predict
their way to the end.
14. In the short term, there is some much-needed good
news. If institutional money managers believe rising rates reflect a
strengthening economy, they will buy the Dow. If they have concerns about the
economy, they will sell the Dow and buy bonds, which is good for the gold
price.
15. Click here
now. You are looking at the daily chart for the TLT bond fund. Note the
oversold position of the RSI, Williams, and CCI technical indicators. A rally
in the bond market should cause a rally in the gold market.
16. The big question is not whether the bond can rally,
but to what degree do institutional money managers believe the economy may
have turned the corner, and for how long do they believe the economy can
continue to surprise the analysts?
17. If institutions believe that bond rallies are to be
shorted rather than dips bought, I would suggest that Martin Armstrong’s
$1100 gold price scenario should not be ridiculed with too much gusto.
18. For now, the gold price chart looks like a bullish
work of art. Click here
now. The enormous wedge pattern sits there basking in glory. The current
pullback appears to be perfectly normal and healthy. The 14,7,7
series for the Stochastics indicator is in a
position where substantial rallies can begin, but it can take several weeks
for such rallies to materialize.
19. Let’s all hope that the gold community’s
“super-wedge” doesn’t turn into a beached whale that is on
the receiving end of a volley of bond market harpoons, launched from a
flotilla of institutional whaling ships.
20. There is more good news in the short term. Click here
now. This chart covers about a month of trading for the Dow, via June
futures. Note the trend line break. That’s a positive event for gold as
well, because it will put pressure on institutions to move back into the
bond, even if it is just temporarily.
21. There is quite a lot of talk going around about
whether the weekly chart of the HUI (senior and intermediate gold stocks) index
shows a “breakdown”. The GDX-nyse ETF
mimics the action of the HUI.
22. Click here
now to view a picture that some analysts believe speaks 1000 words,
ominously, for gold stocks. The 500 price point on the HUI corresponds
roughly with the $50 round number price point for GDX.
23. Is there a breakdown? A technician could argue that
a fall to any lower prices would usher in a fall towards $33, based on the
view that the entire $50-$67 price range is a “top”.
24. I would argue that you need to carry a short
position that is up to 30% of your long position, or utilize put options, to
manage such powerful fears. I’m a buyer of GDX, all the way to a price
point of zero. I don’t really care whether GDX falls to $33 or rises to
$133. Do what it takes to maintain the utmost professionalism on the price
grid, especially when this crisis takes you deep inside of your personal
surprise zone!
Special Offer For
Website Readers: Send me an Email to freereports4@gracelandupdates.com
and I’ll send you my free “What Is Currency?” report. Learn
whether you are using dollars or gold as currency, and what the advantages
are of both systems!
Thanks!
Cheers
St
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