More broadly, where does the price of gold go from here?

gold charts

James Rickards commented on gold at The Daily Reckoning. He said, “The most important signal is that gold’s uptrend, which began on Dec. 15, 2016, remains intact. Even after the flash crash, gold remains just a bit below the previous low of $1,210 per ounce on May 10, 2017. That means gold is set for a rally above $1,300 per ounce, which would exceed the prior high of $1,293 per ounce on June 6.

“The next powerful indication is the marked slowing of the U.S. economy in reaction to rate tightening by the Fed. This slowing economy shows up in auto sales, retail sales, disinflation, lower labor force participation and many other indicators.

“The result of this slowing will be that the Fed will have to reverse course and use “forward guidance” to signal that they will not hike rates in September. That’s a form of ease that will lower the dollar index and raise the dollar price of gold.

“Finally, investors can take comfort from the fact that all manipulations fail in the long run. Whether it’s the “gold corner” of 1869, the “gold pool” of 1968, Kissinger’s secret “gold dump” of the late 1970s, or “Brown’s bottom” (when the U.K. sold most of its gold at 30-year low prices) of 1999, or the more recent gold games on the Comex, all manipulations fail. Gold prices always find their way higher, because paper currencies always lose value over time.

“The key response functions to manipulation are patience, confidence in the long-run path of gold and nimbleness in stepping up to buy gold at interim lows when manipulation gets out of hand, as it just did.

“The gold rally that began on Dec. 15, 2016, is poised to continue despite the trauma of the flash crash. The crash represents a gift to investors. We now have a better entry point for what will still be much higher gold prices later this year.”

The gist of the article is gold is in very short supply. It may not look that way from the price, which is the paper price. When it comes to buying the physical, most dealers have nothing for sale in larger quantities.

James Rickards is well respected and world renowned. He talks with governments, central banks, and large moneyed investors.

It seems to me though that the low for gold was $1063.97 in December 2015; then there was a second low at $1123.81 in December 2016. Drawing a trendline through those two lows yields support this month at about $1175. I wouldn’t want to see that line broken. Another way to look at XAUUSDO or Gold Spot is to look at where we are versus three weeks ago and three months ago. To get a monthly buy signal, I would need a move higher than $1295.56. On a weekly chart, $1277.58 would need to be broken this week and $1258 the next two weeks. Currently, the monthly, and weekly are signaling lower prices.

Martin Armstrong postulated an interesting theory: He thinks that we need to break support to provide a major buy signal. The breaking of support would provide a catapult to much higher prices. Anything below $1175 would turn everyone bearish, and the last diehard holder of gold would sell.

The fear that you sold at the bottom is real. One night recently I sold all my gold and silver stocks. Before I went to bed, I checked gold prices and gold was up about $8.00. I couldn’t sleep for hours kicking myself for selling at the bottom. The next morning, I looked at gold, and it was down $4.00. What a relief!

One comment

  • Thanks for sharing! I’ll be honest, I’m not bullish on gold. Or any metals. That said, I think there’s some credibility to Ray Dalio’s All Weather Portfolio. I believe he has a certain allocation towards precious metals and also commodities.

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