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The Big Story: Is It Gold Bug Glory?

Published 10/17/2023, 03:57 PM
Updated 02/07/2024, 08:50 AM
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The 2021-2025 war cycle is intensifying with a new war involving Gaza and Israel.  Will it push gold to record highs?  

 Yes, it could, but other key drivers like US rates and Asian physical demand need to be supportive for any gold price rally to have barnburner potential.Gold Prices
The short-term gold chart. The rally from the $1810 buy zone has been awesome but.

What’s next for gold is likely determined by how the Israeli government’s ground troop invasion plays out.

It’s already been delayed so gold has lost some momentum but not much, and a pause in the rally was likely anyways.

If the delay continues, and US rates stay firm with the Indian physical market buying quiet, gold could build a right shoulder or two, as part of the potentially large inverse H&S pattern that appears to be coming into play. CFD's on Gold
If the invasion happens fast and brings horrifying mayhem/blowback, gold is likely to blast out of the bull flag pattern that’s currently in play and, Shoot right to $1985, and perhaps to $2050!Gold-Weekly Chart
There’s a big consolidative drift pattern on the weekly chart with a $2480 target.

The US government’s bungled meddling in Ukraine and Gaza is likely to be the main catalyst that drives gold out of the drift pattern and towards the $2400 zone.10 Year Yield Bond
What about US interest rates, are they supportive of such a rally?  Basis the ten-year bond/note, the technical action is decidedly negative.10 Year Treasury Yield Index
On the long-term chart, there’s huge resistance in the 5%-5.25% zone. 

A last-gasp rally to 5%-5.25% could occur and it would fit with one late-year hike from the Fed.  The bottom line is this:

Whether there’s a final hike or not, the next big move is almost certainly down for rates, and up for gold. I’ll dare to suggest that the world’s biggest war and debt cycle story is set to become global gold bug glory.USD Index
The DXY dollar index chart is also very negative. H&S top patterns after a major move can be significant and there’s one in play for the dollar now.

A H&S top often becomes the left top of a double top pattern, which is even more negative for the price outlook.

A collapse in the dollar looks imminent. If it occurs as Gaza turns into a horrifying gulag, it would be rocket fuel for gold.GOAU ETF-Daily Chart
What about the miners?  The GOAU daily chart looks like Michelangelo sculpted it.

Gold stock enthusiasts should make note of the $18.50 and $21 target zones and expect to see GOAU reach both price levels soon.BPGDM-Weekly Chart
The important BPGDM sentiment chart.  It’s a weekly chart and sentiment is now at about the same level as it was at the lows of last fall.

Gold surged $400/oz higher from the October lows of 2022 and the gold price consolidative drift target is also $400-$500 higher than where gold is now.

In addition, note the action of the BPGDM Stochastics oscillator at the bottom of the chart.  I use the 14,5,5 series for weekly charts. This key oscillator is massively oversold; even after the mighty surge in gold, silver, and the miners, both the lead and lag lines are still under 20. 

In a nutshell, the BPGDM is a key indicator for the miners, and its current posture is outrageously bullish.   As noted, the only happy part of this hideous war and debt cycle story is global gold bug glory!

 

 

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