Gold Market Is Quiet On Seasonal Softness
Stewart Thomson | Jul 26, 2016 01:22PM ET
That may be about to change, as both the US and Japanese central banks are having policy meetings this week.
The Fed meets on Wednesday, and the BOJ follows on Thursday. There is also some confusion in regards to the BOJ’s position on perpetual bonds, which are also known as helicopter money.
A few days after the BOJ and Japanese government officials met with Ben Bernanke, the BOJ released a statement from Kuroda that he is totally against helicopter money.
It turns out that Kuroda’s statements were made back around June 17, weeks before he and the Japanese government met with Bernanke.
It should also be noted that Kuroda said he was opposed to negative interest rates, and then engaged in that policy anyways. Will the same thing happen with perpetual bonds?
The BOJ could make a blockbuster announcement on Thursday. The big questions for the Western gold community are these: Will helicopter money cause the yen to lose its safe haven currency status? If so, will that be positive or negative for the price of gold?
Part of the reason I was able to successfully forecast the massive rally in gold from the late December 2015 lows was because of the giant top that formed on this US dollar versus Japanese yen chart.
I don’t expect Janet Yellen to shock the market with a rate hike tomorrow. It’s Kuroda that is under pressure to announce something big, because Japan is slipping back into deflationary recession.
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This is the daily gold chart. Technically, gold is in sync with the fundamentals I discussed above.
Gold is drifting lower in a nice bull wedge pattern ahead of the central bank meetings. Note the fabulous position of my key 14,7,7 Stochastics oscillator, at the bottom of the chart.
Technically, gold is ready to charge towards $1375, $1392, and then surge above $1432, but whether that happens or not in the short term will depend on what the BOJ does on Thursday.
The overall “background music” for gold is extremely positive. Institutional money managers believe more negative rate bonds are coming, and they view gold as a currency.
Since gold pays a zero percent interest rate (and a positive one with India’s sovereign gold bonds), gold is becoming a favoured currency.
Bob Moriarty wrote a book called, “Nobody Knows Anything” that he asked me to read and review. I could probably talk for hours about some of the key points in the book, and maybe I will, but the bottom line is this: In my professional opinion, Bob is probably the hardest-working person in the junior mining space, and certainly one of them. He endures a travel schedule that most younger men, including me, couldn’t handle if their lives depended on it. That fact alone should get anyone’s attention.
There is a lot of synergy in what he writes in that book, which is for sale on Amazon (NASDAQ:AMZN) where I bought it, with how I operate my newsletter. Here’s why: My most important theme is an investor’s “personal surprise zone”, and how to deal with that using professional tactics.
Most analysts try to predict the direction of the gold price, but I’m emphatic that serious wealth in the gold market is only built and retained by being able to buy prices that the investor never predicted, and probably believed were impossible.
Combat veterans like Bob tend to be very street smart, and they also appear to have a very good understanding of luck.
Successful business owners work extremely hard, but most of them will also acknowledge that lady luck played a big role in their success.
The winner is able to use their incredible work ethic and street smarts when they get lucky, and that’s the key to success.
The investor who buys gold when all their analysis has failed them in their personal “Nobody Knows Anything” zone, is the investor most likely to succeed.
While nobody knows for sure what the BOJ will do on Thursday, or what Janet will do tomorrow at the Fed meeting. That’s the GDX daily chart. Note the blue support zone in the $26.80 area.
To get richer with gold stocks, using the “nobody knows anything” mantra, investors cannot predict whether GDX will trade at $26.80, but they can prepare to take buy-side action, if it does!
The $26.80 support zone can also be seen on the weekly chart. Aggressive gold stock enthusiasts can buy right now, ahead of the Fed and BOJ meetings. More conservative investors like myself will typically wait for $26.80 before buying. All in all, it’s a super time to be invested in the precious metals sector, and I hope everyone is cheering for a gold-positive announcement from the BOJ on Thursday!
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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