Gold: OPEC, Inflation And Option Expiry
Stewart Thomson | Sep 27, 2016 12:35PM ET
If gold is to move substantially higher and retain the bulk of those gains, inflation needs to become a significant concern.
This is the eight-hour bars gold chart. An upside breakout seems imminent, but patience is required.
A breakout from that drifting rectangle pattern I’ve highlighted on the chart is significant,because it creates a much bigger breakout on the monthly chart.
Gold is almost ready to begin a significant leg higher.
The US presidential debate had almost no effect on the gold price, and that’s because most of the questions had nothing to do with the economy.
This is the interesting 8-hour bars chart of the Dow Jones Industrial Average.
The US stock market initially rallied after the debate, but it’s since given back most of those gains.
There’s a clear bear wedge pattern in play on the chart, and that follows a breakdown from a head-and-shoulders top pattern.
The bottom line is that the September – October time frame is crash season for the US stock market, and the situation is grim.
Who won the debate? Well, mainstream media is essentially socialist, and they say Hillary won.
Social media statistics suggest that Trump won the debate, and that’s because social media was more focused on the economy than mainstream media.
Get The News You Want
There are a lot of Trump fans in the Western gold community, and I suggest they focus on social media as much as mainstream media, to keep on top of the pre-election action.
Merrill analysts have just issued a blockbuster report, suggesting that a multi-year supply output squeeze is coming.
I think they are correct, and this has significant implications for the price of oil, which is by far the single largest component of most commodity indexes.
This is the eight-hour bars oil chart.
Crude oil is coiled in a nice bull wedge pattern, and poised to surge towards the $50 area highs, and perhaps to $53.
Some oil bears have suggested that electric cars could put pressure on long term oil demand. I agree, but they will put more pressure on oil companies to cancel new mega-projects.
Electric cars will not produce a lower oil price, but, ironically, a higher one! There are many factors working synergistically to drive inflation higher, and oil is certainly one of them.
I’m getting a lot of emails from investors who are worried that gold stocks could get hit hard if the US stock market crumbles. Here’s the bottom line:
There’s no question that there appears to be more margin used in the gold stocks arena than the bullion arena, at the current time.
It’s a different situation from 2008. In 2008, hedge funds were forced to liquidate gold to meet margin calls caused by the OTC derivatives crisis.
Now, a loss of confidence theme is brewing, with the focus on central banks and government treasury bonds.That means that institutional money managers are much more likely to buy gold in a market meltdown event. Gold stocks can decline initially if the stock market crashes, but they will soon follow gold, and move higher.
This is the VanEck Vectors Gold Miners (NYSE:GDX) chart. Note the position of the Stochastics oscillator, at the bottom of the chart. GDX is more solid here than most investors think.
While the presidential debate received a lot of attention, I’ll dare to suggest that tomorrow’s COMEX option expiry is much more likely to be the catalyst that produces a fresh leg higher for gold, and for stock in the companies that mine this mighty metal.
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.
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?
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.