At the current pace of quantitative easing, Japan’s central bank is buying so many bonds that it now has about 24 months left before there are no more bonds left to buy.
The BOJ is buying close to $800 billion (USD) of bonds annually. The bank’s QE program is truly gargantuan, and Kuroda made a key speech at Jackson Hole indicating he has no intention of tapering it at all.
Gold is extremely well-supported now, by both equity fund and FOREX money managers.
Kuroda hinted at Jackson Hole that while he won’t taper QE, he has substantial room to increase the use of his negative rates program. He’s making another key speech next Monday, and I expect him to make it clear that as enormous as his QE program is, he’s going to lower interest rates further, and make it even more important policy than QE.
The US jobs report is scheduled for release this Friday at 8:30AM. When Janet Yellen hiked rates last December, a huge institutional panic out of stock markets and the dollar developed.
These institutions surged into gold and the yen. A big jobs report number is likely to spur Janet to unveil a second rate hike at the September 21 FOMC meeting.
This is probably the most important jobs report of the entire year, and Janet’s reaction to it could begin a major stock market and US dollar crash.
The September and October timeframe is what I call “US stock market crash season”. The worst stock market crashes have historically occurred during these months, and Friday’s jobs report has the potential to create another one.
Gold price enthusiasts should pay keen attention to all the upcoming speeches made by key players at both the BOJ and the Fed. Those speeches and policy decisions are likely to create important changes on the charts that gold market technicians focus on.
This is the daily bars gold chart. Ahead of the US jobs report, gold is likely to briefly decline to the $1310 area or a bit lower, but Kuroda’s speech on Monday is likely to bring in fresh buying. The bottom line:
If the jobs report shows not many new jobs were created, gold is likely to rally nicely. If the report shows lots of jobs were created, Janet is likely to hike rates and create panic buying of gold as the stock market tumbles. It’s truly win-win for the Western gold community at this point in time.
Indian buying has also started to pick up again, and Chinese New Year buying begins in December.
This is the daily bars T-bond chart. There are a few different ways to interpret this chart, but it’s beginning to look like a big double top pattern may be forming, with highs in the 175 area, and the neckline at about 168.
This is the daily bars oil chart. The T-bond took a bit of a tumble after Janet’s first rate hike, but then it acted as a safe haven.
That’s because the oil rally from about $34 to $53 was not an inflationary concern. Janet can justify a September rate hike with a good jobs report, but if oil begins a fresh rally higher, she may find that institutional money managers begin losing confidence in her ability to keep the T-bond price elevated in the face of a rise in inflation.
Low rates are crushing bank profit growth in Japan, Europe, and America. An oil price surge can create a major problem for central bankers in these areas; rate hikes help bank profits, but raise the risk that governments may lose control of their enormous debt servicing costs.
The PBOC could announce a major yuan devaluation if Janet hikes rates in September, and that could potentially unleash the type of stock market crash that occurred in 1929. It’s clear that risks are growing in a myriad of ways, and gold is the safe haven beacon that shines brightest.
Also, Janet is faced with a US election, a French election, an Italian referendum, as well as the “meat and potatoes” of the Brexit.
At Jackson Hole, she discussed the possibility of negative interest rates and new forms of QE as tools to manage the next US economic recession. The use of these tools is more good news for gold.
This is the daily bars silver chart. Solid support sits just below the current price level. Note the nice “bull hook” that is taking shape on the Stochastics oscillator, at the bottom of the chart.
Silver is one of the greatest assets of all time, second only to gold on the greatness scale. Price enthusiasts can be buyers in the $18.50 - $16 zone. I’m one of those enthusiasts!
This is the daily bars GDX chart. This price correction is a bit different from the other corrections that have occurred in 2016.
That’s because of the enormous importance of Jackson Hole, the jobs report, and the upcoming Fed and BOJ meetings. There is some clear technical damage, and GDX is unlikely to make new rally highs until after the September central bank meetings.
The current area is a buying zone for eager gold stock investors, but where the correction low occurs will be determined by Janet & Kuroda, not by technicians looking at the GDX price chart. Note the extremely low position of my Stochastics indicator, at the bottom of the chart. It suggests that gold stocks are poised to rally strongly, and that is likely to happen right after Friday’s jobs report is released!
Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.
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