Originally published by Chamber of Merchants
Last night some economic numbers were released that reinforce the case for Gold. In one line: There will be no November rate hike by the Fed based on the numbers (as I have said many times) and even December is looking less likely. I’m of the opinion that while investors will be afraid to enter into the precious metals sector, waiting for a pullback or another knock down, the price of Gold is going to get away from them, very very quickly.
Miners will bounce today
If you look at the miners in the US via the GDX (NYSE:GDX) stock quote, you’d notice that overnight (I’m in Australia) the precious metals sector received a boost in capital flowing back in. the same trend is about to hit Australia today.
I previously mentioned that this nightmare phase, the flush out, is designed to knock out stops allowing the big and smart money to position themselves for the next leg up. I predicted on the 5th of October that we’d have a bounce in 4-9 trading days. I did expect Gold to be higher by now, but as I mentioned previously, there are transactions and agendas in the background that none of us are privy to. What’s important from a portfolio point of view is that it appears that take up a position while the miners were testing their supports was the right decision.
We’re not out of the woods yet, but from a fundamental, economic point of view, the case for Gold is better now that it was 3 months ago. This leads to me suspect that we will be hitting our $1370+ price target even though to any onlooker it looks very unlikely. Onlookers don’t have skin in the game. I do. I have my wealth and family’s future invested in a sector that I believe is going to make unbelievable gains. And we’re just getting started.
Looking at the open, it appears that the portfolio stocks will all gap up on the ASX market open:
Millennium (AX:MOY) 28.5c
Ramelius Resources Ltd (AX:RMS) 46c
Blackham Resources Ltd (AX:BLK) 74c
Silver Mines Ltd (AX:SVL) 19c
Now keep in mind, these numbers are not yet interesting. But the gap up indicates that the market is starting to catch on to the bigger picture. The bigger picture that I’ve been sharing with you for the last few weeks.
I’m of the opinion that these price levels in the precious metals miners will not be available after this week.
This is why.
Inflation Disappointment
The Central Banks are in love with inflation. Every since inflation got out of control a few decades ago, inflation targeting was heralded as the new economic policy. And it worked.
However, it doesn’t work in reverse. The Central Banks are trying to stimulate inflation by keeping interest rates super low. Additionally they’re injecting funds into the stock and bond markets, hoping that it will have a trickle down wealth effect.
So let’s put this into perspective: After 8 years of incurring trillions of dollars of debt, after keep interest rates virtually zero for almost a decade, how successful have the central banks been in strengthening the economy?
It’s been a failure. And they’re about to try again.
Economic growth is barely holding on to 1% and inflation numbers are disappointing to say the least. In fact last night’s CPI numbers came in well below estimates.
So when you hear Janet Yellen talking about the economy running hot, I would like you to imagine a car get pushed by several people(central banks), uphill(poor growth) , while Janet Yellen is twisting the ignition pumping the gas pedal, hoping that this economy is going to start. Except it’s not.
Ultimately, my money is literally on Gold and Silver. If I were not already in 100%, I would see the poor economic data has additional justification for the next rally in Gold. That is because the reasons for Gold’s rally from $300 to $1900 haven’t changed. In fact, the solution to remedy the Global financial crisis is about to make a come back and I see a very high probability trade in the precious metals.
Conclusion
This post is shorter, I know.
But really, nothing has changed: case for gold is strengthening, meanwhile, back at the ranch, the central banks are starting to change their rhetoric. Janet Yellen may not appear to have a supple physique, yet she backflipped like an olympian when she mentioned that they may want to “let the economy run hot”.
Folks, ladies and gentlemen, we’re witnessing history in the making.
We’re almost out of the dip.
I will soon touch on a mistake that many emotional investors are about to make as we move out of the precious metals dip. I want to bring it to your attention so that you can recognise it for yourself and, I hope, avoid sabotaging your portfolio.
Stay tuned for that post.
The theme is still:
Think more, Feel less.
Enjoy the bounce, but don’t celebrate it.