Originally published by Chamber of Merchants
A very odd thing has occurred in the past few weeks. It appears that all the traders and investors who were bullish on gold have just turned considerably bearish on the assumption that gold’s run is finished for now and that the stock market (Dow Jones Industrial Average, Nasdaq 100 etc) are where the action is going to be.
The gold miners have been lagging, while gold has held above $1250 USD some time now: a symptom of lack of faith in the sector as well as some behind the scenes big boy action.
And since I’ve been 100% cash for weeks now… I’m loving it.
I’m 60% in already and these are my holdings so far:
Many traders in my network and many newsletters that were bullish on gold miners just a few weeks ago have suddenly abandoned ship to join the easy money to be made in the “protected” stock market.
That suits me just fine. It means I can pick up some Money Making Machines as the Speculator puts it, at bargain prices.
Now these may not be the bottom prices… Hence I’m only in 60% while I have 40% cash still waiting on the sidelines.
However, in the next few days I will continue to scan for excellent entry points that will be benefit me in about… oh… 4 weeks.
4 weeks from now
I have a strong expectation that Trump’s failure to achieve healthcare reform has unsettled the market’s confidence.
Previously we all imagined that a majority Republican government would approve these issues with no sweat. However, failure to Repeal and Replace Obamacare raises doubt as to :
- Whether or not the tax cut promises will be fulfilled
- Whether or not the debt issue will be resolved by 28th April (the day the govt runs out of funds)
- By the way, French elections are 5 days prior (Got gold?)
- Whether or not the infrastructure spending that was being touted will be delivered.
- Whether America will really be great again.
The point is not whether the above will or won’t be achieved. The point is the doubt.
And gold flourishes in doubt.
So, 4 weeks from now I do expect some positive results from the entries made into the gold sector. Patience will be key.
In addition… We have a few developments that bode extremely well for gold.
The Fed
The Fed raised rates. Gold strengthened. Well, they want to raise rates another 2 times this year. I don’t expect gold to reverse course and weaken.
Additionally, the Fed is only raising rates so that they can lower them again.
GDP, productivity, wages etc are all becoming worse. GDP for example in the USA started out as an estimated 3.2%. Now it’s already down to 1%. And remember, raising rates slows an economy. Wow… how much lower than 1% GDP do they want? We’re about to find out.
Inflation
Inflation is here. All the hard data points to inflation rising and that essentially means that the currency we use to purchase “stuff” will buy less and less stuff each quarter. How to fight inflation? Gold. And smart money knows that.
So it surprises me when Bloomberg TV today reported ” Gold is likely to hit $1500 USD” in 2017.
Yes. That is surprising. To me it means that positions have been taken and the smart money is sending the message that gold will be allowed to run. (At least that’s how it seems.) Keep in mind that we live in generations that do not really appreciate the thieving power of inflation. It is one of the greatest sources of poverty in capitalism. Inflation is not only bad, it’s devastating. But no one will tell you that. In fact, the Fed prefers a 2% inflation rate.
Except it’s about to go a whole lot higher and they’re way behind the curve on trying to control it.
Got gold?
Brexit
Brexit is finally here. No turning back. This week marks a historical move with Article 50 being triggered. Currency market volatility will be good for gold.
Debt Ceiling and Government Funding
28th April 2017 is the official day that the United States government runs out of funds to do anything. I expect that the lag in the miners is due to the upcoming volatility in the stock market and dollar, hence these lows have been a buying opportunity.
If I’m wrong I’ll simply hold till the next quarter / half year results. A win win, since these companies are generating cash and experiencing growth (RMS especially).
So while the newsletters fail us, all jumping into the Dow band wagon, I patiently gather the unloved scraps that are literally gold mines: the source of real money.
My next target is Blackham Resources Ltd (AX:BLK).
Now, I admit, I got kicked out of my previous BLK trade. However, I also lacked conviction in what the near term future held with regard to the economy etc.
Now, given the numbers and economics, I am convinced that gold will be the winner in 2017.
Of course there will be cycles throughout the next 9 months. No straight lines.
Buy low, sell high.
I believe some of the the miners are low right now. In fact, I do hope they go lower.
The Merchant will be pulling up his wagon to load up the unwanted ones.
He’ll polish them up and sell them when everyone wants shiny things.
Faithfully,
| the Merchant
P.S I’ll release some charts tomorrow.