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Is USD Still Important To Fiat Enthusiasts?

Published 10/13/2015, 10:33 AM
Updated 02/07/2024, 08:50 AM

USD/JPY

That’s the US dollar versus Japanese yen daily chart. The dollar collapsed in August, as global stock markets suffered a meltdown.

Simply put, the yen acted as a safe haven during the stock market crash, and the dollar acted as a “risk on” asset. The dollar is now trading in a fairly large symmetrical triangle pattern, after breaking a key uptrend line.

A bearish double top pattern also appears to be in play.

Daily Gold

Many large FOREX traders like to buy gold when the dollar falls against the yen. That’s the daily gold chart, and it looks excellent.

A full downside breakout would have targeted the $1000 area, but it didn’t happen. Instead, the move was to the upside. From here, a pullback to the $1130 area is easily possible, given the substantial rally that has occurred.

The Latest COT Report

That would put gold roughly at the apex of the beautiful triangle pattern. That’s a snapshot of the latest COT report. The banks are shorting some gold into this rally. Since the release of that report, gold has rallied again, and the banks have likely added a lot more short positions.

Rather than waste energy trying to determine if the $1070 area is some sort of “ultimate low”, amateur gold investors need to calmly book some light profits into this decent rally, while cheering for higher prices!

From the apex area, a surge to my technical target area of $1250 seems quite attainable, given the fundamental background of weak global equity markets, the PBOC’s new gold buy program, and surging demand in India.

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Exchange Head Named At Shanghai

I predicted that the Shanghai Gold Exchange would not launch its gold price fix until late in 2015, and Reuters is suggesting that a new SGE chairman may be appointed very soon.

It appears that the SGE gold fix is roughly on schedule. That’s phenomenal news for all gold enthusiasts. The new fix should help reduce the strange mini-crashes that often occur on the COMEX during the night.

Gold is probably poised to begin trading with much greater stability and transparency than it has for many years, thanks to the tireless efforts of the entire SGE team.

On Gold Imports

Gold-related events in India are also very encouraging. Dore bar imports and refining are clearly being ramped up in a big way, and several refiners are working hard to become LBMA-certified.

The cold reality of what I call the coming “bull era” is that most Western gold investors, including myself, got into gold for reasons related to the fear trade.

Ironically, odds are high that love trade demand in Chindia is what ultimately drives gold to prices that enthusiastic fear traders only dream about.

The fear trade will always play a key role in global gold price discovery, and geopolitical events in the Mid-East are the most likely catalyst for the next big price surge.

The fear trade related to economics may be on the back burner for a while. Once US inflation and government entitlement problems become a serious concern for money managers, it will move to the front burner again.

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I predict that happens in 2017, as Chindian love trade demand begins to overwhelm mine supply. A perfect “gold price storm” to the upside is coming. For all good things, patience is required!

In the meantime, with mine supply roughly unchanged, love trade demand and the PBOC buy program alone, should steadily push gold to higher levels that aresustained.

Both Market Vectors Gold Miners (N:GDX) and Market Vectors Junior Gold Miners (N:GDXJ) can likely trade at a new high, with gold only rising to about $1500. There are two reasons why this is possible.

First, most gold-mining companies are vastly “leaner and meaner” now, than they were several years ago. Second, steadily rising US inflation with a soft general stock market is highly attractive to large institutional money managers.

Gold Miners

Like gold bullion, gold stocks are overbought in the short term, and eager traders can book light profits now.

GDX: Inverse Head And Shoulders Bottom

There is an inverse head and shoulders bottom pattern in play, and the great news is that it may be morphing into a bigger one. While a shallow pullback is probably preferred by most gold stock enthusiasts, GDX could decline to as low as $14, to carve out the right shoulder of this bullish pattern.

If all plays out as I’m projecting, this year should end with GDX trading in the $18 to $19 price zone, poised to begin a fabulous year in 2016.

Written between 4am-7am. 5-6 issues per week. Emailed at aprox 9am daily.

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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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 qualified 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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