-- Published: Tuesday, 9 December 2014 | Print | Disqus
By Stewart Thomson
1. Is there a strong bull flag pattern in play on the daily gold chart? For the likely answer, please click here now.
2. The US stock market has lost upside momentum, and the falling price of oil threatens to create an ďArmageddonĒ type of event in the junk bond market, yet gold looks and feels superb.
3. Please click here now. In addition to the bullish flag pattern, thereís an inverse head and shoulder bull continuation pattern that looks solid. The target of this pattern is the $1275 - $1280 area. Is the Western gold community going to receive an early Christmas present, in the form of another rally in the gold price? These charts suggest they are!
4. For a closer look at the gold price action, please click here now. Thatís the hourly bars chart, which I use to magnify both the flag and the head and shoulders pattern. A solid rally seems imminent.
5. I think the dollar may be about to fall fairly hard against the Japanese yen, and that could help to activate the bullish patterns on the gold charts.
6. Please click here now. Thatís the daily chart, showing the dollar down again against the yen, in early trading today. Note the bearish non-confirmation event in play on my 14,7,7 Stochastics oscillator.
7. Many gold bears, like Jeff Currie of Goldman Sachs, appear to be somewhat stunned that when gold briefly traded under $1180, it failed to fall quickly to $1050. Instead, while the yen has suffered a truly horrific collapse, gold has rallied back to $1200.
8. The error in gold market analysis by the bears can largely be explained by their complete failure to predict the recovery of demand in India. The recovery has been spectacular, and I predict itís not just here to stay, but here to soar, on what Iím predicting will be double digit GDP growth.
9. Please click here now. Thatís the hourly bars chart for oil. I was a light buyer of oil stocks as oil arrived in the $73 area.
10. Iíll be a much heavier buyer at $55 and $40, and Iíll ask the gold community to buy if the price falls there, but the big news about lower priced oil, is related to its powerful effects on the Indian economy and the nationís current account.
11. Please click here now. Indian inflation just fell to a record low. The mafia appears to have some influence on the Indian finance ministry, but under what appears to be substantial pressure from the central bank, I expect India to reduce and possibly completely eliminate gold import duties by the spring of 2015, and perhaps sooner.
12. There is simply too much pressure to cut these duties, with smuggling totally out of control, record low inflation, and falling oil prices that could soon turn the current account deficit into a surplus.
13. The chop in gold duties will boost government tax revenues. It will take hundreds of thousands of jewellery workers off the breadline, and put them back to work. Most importantly (for the Western gold community), it will boost demand for gold.
14. China is also in the news, and the news is excellent. I think most analysts are seriously underestimating the importance of the Chinese central bankís decision, made just days ago, which allows more jewellers to import gold.
15. Also, Hong Kongís top gold industry players have just formed a major link with the Shenzhen jewellery manufacturing area in China, where about 70% of all Chinese gold jewellery is manufactured.
16. Please click here now. This new Hong Kong/China gold market synergy is very bullish for gold. It should quickly produce a significant increase in Chinese gold demand. To view the synergy in more detail, please click here now.
17. At the current point in time, gold is clearly a pillar of strength, both fundamentally and technically. While events in China and India revolve mainly around gold jewellery demand ramp-up, America may be set to become a key driver of gold stocks. Hereís why:
18. Iíve argued that the Fed would reduce its balance sheet, and thatís in play now. Iíve predicted that the reduction would create a smaller money supply, allowing for a surprising upturn in money velocity. That is happening at the same time as wage pressures grow, and commercial banks are nudged by the Fed to begin making more aggressive loans with their reserves.
19. Those reserves exceed two trillion dollars. Alan Greenspan has referred to their potential movement as inflationary tinder, and rightly so.
20. Influential economist Mike Ivanovitch is respected in the mainstream financial community. To understand his new views on US inflation dangers, please click here now. Interest rates will rise, but not much, because commercial banks are set to lend out reserves, and flood the system with liquidity.
21. Mike ended his discussion with this strong statement: ďEquities are still my preferred asset class -- provided the portfolios are carefully reviewed toward a defensive posture. Also, think of putting some of that yellow stuff under your Christmas tree.Ē ĖCNBC News, December 8, 2014.
22. While most gold analysts are focused on the fear trade, I think itís too early in the economic cycle for that. Institutional money managers focused on gold bullion ETFs during the 2008 crisis. They saw system risk, and focused on bullion rather than gold stocks. I think that as the inflation Iím predicting begins to appear in 2015, the money managers will focus on gold stocks much more than on bullion.
23. On that note, please click here now. Thatís the daily chart for GDX. The downtrend line has been clearly penetrated, and thereís an irregular drifting rectangle pattern in play. My short term target is $22. Itís tax-loss selling season. As a result, gold stocks are trading erratically, even though gold itself is doing well.
24. A nice gold stocks rally should begin early in January. Thatís just three weeks away. My suggestion is to put some quality gold stocks under the Christmas tree, and get ready for a super year in 2015!
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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 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:
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-- Published: Tuesday, 9 December 2014 | E-Mail | Print | Source: GoldSeek.com