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Deflation Is Bullish For Gold Stocks

 -- Published: Tuesday, 7 October 2014 | Print  | Disqus 

Graceland Updates

By Stewart Thomson

  1. Gold-bearish Western bank economists are very lucky. They can gleefully ignore Indian black market imports in their assessment of demand and supply, and nobody questions them.  
  2. Thus, a tiny outflow of gold from Western ETFs in September is relentlessly highlighted as a harbinger of gold price doom, while recent reports that India is importing more than 15 tons a week in the black market, are swept under the rug.
  3. Unfortunately for the bearish economists, they canít ignore official imports in India. The consensus among economists was for Indian September official imports to come in at about 60 Ė 80 tons. Please click here now.
  4. The official imports soared to 131 tons for September. It did so with all the import duties fully in place. That canít be ignored, and coupled with another 60 tons of unofficial imports, total demand was probably about 190 tons.
  5. Iíve argued that the biggest game changer for gold price discovery would be the addition of more LBMA-certified refineries in onshore India. On that note, please click here now.
  6. Rajesh Khosla runs Indiaís only LBMA-certified refinery, and heís calling for more to be built, to encourage FDI (foreign direct investment) in Indiaís jewellery industry.
  7. Indian Prime Minister Narendra Modi takes great pride in his track record of encouraging economic growth. Gold jewellery is the second largest employer in India. It will become harder and harder now, for Modi to remain silent about goldÖ.the worldís ultimate asset!
  8. To view the entire article, please click here now. Itís critical that members of the Western gold community understand that the monetization program proposed by Khosla and the bullion banks only targets about 250 tons a year of scrap gold.
  9. The bulk of the refining would be aimed at gold that is mined by Western mining companies.
  10. While demand skyrockets in India, please click here now. A week ago I urged short term traders and options players to be patient, and wait for my price stoker oscillator to reach the 21 area, before buying. Itís there now, and gold looks ready to launch an assault on overhead HSR (horizontal support and resistance), in the $1240 area.
  11. The meltdown in Japanese and European GDP has caused most fiat currencies to sink against the dollar. In the big picture, this is likely to increase inflation in China, and could create a significant increase in gold buying, by inflation-wary citizens.
  12. The US dollar is strengthening on economic weakness in other nations, rather than on economic strength in America. Thatís very dangerous. Global demand for oil is collapsing, and the dollar rally is exacerbating the problem.
  13. If oil prices decline further, the entire fracking-focused US oil boom is at risk of imploding. If that happens, America could be thrown back into recession.
  14. In the short term, the dollar rally seems overdone. Please click here now. The weekly chart shows the Canadian dollar arriving at significant buy-side HSR, in the 88.73 area. A rally towards the 90 Ė 91 zone would likely coincide with gold rising towards $1240.
  15. Iíve argued that oil price deflation could create a massive rally in gold stocks, while gold rises modestly, moves sideways, or even declines slightly.
  16. Thatís because falling oil prices are reducing the cost of mining gold. Please click here now. Note the RSI oscillator. Itís turning sharply upwards from the 30 area on this daily GDXJ chart.
  17. Junior gold stocks are dear to the heart of the Western gold community, and Iím looking for an initial rally towards $34.22, with follow-through action to the $36.76 area.
  18. If oil declines further, while bank economists begin to acknowledge the gargantuan surge in gold demand that is occurring in India, they may begin to aggressively recommend gold stocks to their high net worth clients.
  19. On that note, please click here now. With the prospect of rising interest rates, money managers are nervous about moving money from stocks to bonds. Gold stocks are the only sector of global equity markets that should be of interest to value-oriented fund managers.
  20. A major decline in oil prices that causes a collapse in global stock markets while Indian gold demand surges, is likely to entice those money managers to recommend gold stocks to their clients.
  21. As the dollar has rallied, the price of silver has declined significantly, and the gold to silver ratio has soared to the 70 Ė 80 area.
  22. What are the implications for silver, if there is a global stock markets crash caused by deflating oil prices?
  23. For the likely answer, please click here now. Thatís the monthly chart of the gold to silver ratio. I sold about one third of my physical silver position for gold in 2011, and Iím starting to buy it back in small stages now, using my pyramid generator to systematically allocate capital.
  24. I view the 70 Ė 100 gold to silver ratio area as offering value for silver investors, and the 45 and lower area as an area of value for gold investors. If the United States economy collapses back into recession because of deflating oil prices, thereís no question that the gold to silver ratio could rise even higher. Regardless, the dropping cost of mining, would likely mean that silver stocks would enjoy the same type of interest from institutional money managers as gold stocks!

Special Offer For Website Readers: Iím currently in Australia for a week, for a gold conference and other matters. Please send me an Email to and Iíll send you my free ďThrow A Gold Bear On The Barbie!Ē report. Iíll show you my favourite Australian gold stocks with significant upside potential, and outline the tactics Iím using to play them. Iíll also include information on the ďSwingogramsĒ, a technical indicator I use to predict sizable rallies in gold stocks.  






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.


Risks, Disclaimers, Legal

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 qualifed 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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