The Phaserl


Gold! The Next Big Move Is Starting

by Dave Kranzler, Investment Research Dynamics:

The HUI index has bounced 21% since December 15th. It’s important to keep in mind that the precious metals sector tends to be very volatile. Yes, it’s pulled back 43% from its August 4th high of 284, but at that point it had been up 184% from January 19th low close. This type of volatility is characteristic of the sector and 40% pullbacks after triple-digit moves up have been not uncommon occurrences over the last 15 years.

Obviously the miners will not move higher unless the expectation of the market is that gold and silver will move higher. The gold/silver ratio hit 84 in early 2016 and dropped down to 64 by July. It bounced back to 74 right before Thanksgiving. Currently the GSR is 71 and is forming a beautiful downtrend formation:

Just to clarify, a falling GSR is one of the signatures of a powerful bull market move in the entire sector. In 2008 the GSR hit 100 and by early 2011 it had hit the low 30’s. We’d like to see this ratio go below that 64 reading sooner or later to extend the downturn pattern.

Another catalyst that will help drive the sector higher is the bond market. The metals have been correlated with long term bond prices this year. That’s not to say that the sell-off since August was caused by higher interest rates per se, but the correlation has been present. In our opinion, the Fed is boxed in still and can’t raise rates anymore this year despite its threat to implement 4 rate hikes this. We saw how a similar threat played out in 2016. Once the market fully understands that short term rates are not going to be pushed higher by the Central Banks, there will be a torrid rally in bond prices that will help fuel an extended move higher in the metals. This will also be accompanied by decline in the dollar.

Shanghai is extremely busy. Just a brief summary of the fundamental factors affecting the physical market in the east. Despite all of the misinformation about India’s gold market being freely disseminated by the western media, the demand for gold in India has picked up considerably. It appears Modi’s move to reduce cash in that economy has stimulated demand for gold. No shock there. HOWEVER, and this is where it could get very interesting, India’s trade ministry has proposed a cut in the gold import duty to 6% from 10%. That’s not to say it’s a done deal, but India’s Budget announcement is scheduled for February 1st, which is when we’ll find out if the import duty will be cut. This would trigger huge demand for gold imports.

In today’s episode of the Shadow of Truth, we discuss the factors that we believe are “brewing” to drive the next leg of the gold bull market:

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4 comments to Gold! The Next Big Move Is Starting

  • Windrunner58

    Gotta be said. Analyzing charts is hogwash. We keep getting these supposed upward moves based on charts (and have been getting them for years), but no one really knows. Until the market manipulators are jailed, charts mean zippo.

    Don’t know why we keep getting these. These analysts are like weathermen. 50/50 chance. If you and I were right 50% of the time on our jobs, we would be kicked out the door.

    I pay no attention to charts anymore. Bottom line, I have been looking at $21.00 silver and $1500.00 gold (here in Canadian $$), for so long that there is no trend. Manipulate away you bastards!!!! Until you are gone, I don’t spin the wheel. I got mine, never look at them, but they are there for when you cocksuckers are finally pinned under a guillotine!!!

    • Eric

      Actually I find charts very useful. But only if you know how to read them. They often show technical indicators like overbought or oversold conditions, support, resistance, trendlines, moving averages, MACD lines and signals, Volume, breakouts, etc.

      Like right now, holding above 1200 could mean a move to 1210 and 1225 quickly with new support at 1200 rather than 1180.

      Manipulation occurs. But the price is fixed in London twice a day. If I was a buyer of Gold (which I am), I would hold steady to see what happens since I already have my positions (core and speculative). I would buy a dip to 1175-1180 if it holds that level. If not, I would wait for 1150. Otherwise, I will wait to see where the resistance is. Gold has been steadily rising since January 1st. Too many times I have bought without paying attention to support and resistance level, only to watch it drop lower. And I would prefer to cost average down, not up. But hey, that’s just the way I think.

  • AgShaman

    Since the CME group announced it was opening an account at the FED….

    Speculation and ‘Bug Theory’ suggests the JP Morgue and the Douche Bank are jockeying their derivatives books for implosion in 2017.

    My guess is they will not be relegated to the dustbin, but rather, thru their account at the FED…will find a way to saddle the Amerikwans with the fraud and fallout that results

  • Ed_B

    “Speculation and ‘Bug Theory’ suggests the JP Morgue and the Douche Bank are jockeying their derivatives books for implosion in 2017.”

    They’d better be doing more than mere “jockeying” of their derivatives books. They’d better be selling that crap hand over fist while they still can, like was done in the movie Margin Call.

    “My guess is they will not be relegated to the dustbin, but rather, thru their account at the FED…will find a way to saddle the Amerikwans with the fraud and fallout that results”

    JPM and Douche Bank are both way too big to be allowed to fail. If they did fail, they would bring down the entire world financial system. Neither the US or Germany will allow that to happen, regardless of the cost.

    Problem is, their derivatives obligations combine for about $150T and there simply isn’t that much capital on this rock to cover that, no matter how it is structured. All that can be achieved by trying that will be the complete impoverishment of everyone on Earth.

    It would be FAR better to allow the banks to die, go through bankruptcy, and be reborn as smaller businesses that are *required* to operate in a more conservative and less risky manner. We simply cannot afford any more YEE-HAW! style banking.

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