Most precious metal assets staged a solid “comeback rally” against government fiat yesterday.
This is the key VanEck Vectors Gold Miners (NYSE:GDX) chart. There’s decent intermediate trend technical support in the $21 area.
Hardcore accumulators can place buy orders for GDX in the $23 to $18 price zone.
The deep-pocketed commercial traders are serious gold buyers now.
They are likely anticipating the resumption of gold imports in India. Imports were halted at almost the exact intermediate trend high of $1300, partly because of uncertainly about the GST tax.
Commercial traders sold aggressively as gold approached $1300. Hedge funds bought, and gold gently swooned down towards support at $1200 where it sits now.
The commercial traders are now very aggressive buyers. The leveraged hedge funds are booking losses on long positions and adding short positions…into what is essentially a $100 gold price sale!
US coin sales are currently just a gold price discovery sideshow; there’s simply not enough physical market tonnage involved with these coin sales to cause the commercial traders to take serious buy or sell action on the COMEX.
Their focus was, is, and will be mainly on the changing flows of gold in the physical markets of China and India.
The commercial trader focus now suggests they are anticipating massive tonnage imports to begin again in India. Clearly, their aggressive COMEX buying is very good news for all gold bugs.
While US financial news isn’t that important for bullion price discovery, it’s very important for the gold and silver stocks.
Several years ago, I made the bold prediction that QE to infinity and rate cuts would become a taper to zero and rate hikes.
That occurred, and I have predicted that these hikes and what I call “QT to infinity” (quantitative tightening for many years) will create serious wage inflation and ultimately a major bull cycle in money velocity.
Gold stocks can “blow bullion to the curb” in this type of environment, and do so for years or even decades.
Top RBC bank analysts now have a similar view to mine about the prospects for the direction of US wage inflation. Up. Wage inflation is a major catalyst for institutional focus on gold stocks.
Rate hikes and QT can create wage inflation by moving huge amounts of liquidity away from government and central banks, and into the fractional reserve banking system.
This in turn is the catalyst for a reversal in US money velocity.
Yesterday’s launch of the new dual currency HKEX gold contract was successful.
It represents another slow but steady step forward by China to get more control of gold price discovery.
Chuck Li is chairman of the HKEX, Asia’s third biggest exchange. Chuck’s statement that Chinese demand is exponentially geared to economic growth is also the foundation of my prediction that a “bull era” is coming.
The exponential demand growth that lies ahead for China will itself ultimately be dwarfed by even bigger demand growth in India. These two gold-obsessed nations will function as a “bull era tag team”.
The bull-era fun for gold stock investors will be magnified due to the rise of inflation in the West.
This is the key BPGDM chart. I view the oversold and overbought areas for gold stocks a bit differently than most analysts do. That’s because gold stocks are so volatile.
The 60-100 area is a decent profit booking zone. The 20 – 0 zone is a good buying area and the BPGDM just arrived at the outskirts of that buying area now.
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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