Gold Miners Setting Up for a Great 2020
My followers and readers know my fascination and excitement about Gold and Silver. Being well versed in economic history, one cannot avoid Gold. Human history is cycles of hard money and soft money, and come 2021, we will be in the 50th year of this soft/fiat money cycle. Interestingly enough, Neil Howe and William Strauss in their book “The Fourth Turning”, predict that there will be a historical cycle which will be ending between the years 2020-2025.
On this blog, and with my work on Gold, I have mentioned how it is a confidence crisis asset. There are 3 reasons why Gold will be going higher in the very near future. Gold rises when people lose confidence in government, banks and the fiat money. You can see a lot of this occurring now. Trump impeachments and passing government spending bills to avoid shutdowns, piling up the debt. The Federal Reserve doing repo which is over the tune of 300 billion a day and Jim Bianco saying this will just increase in size. Central banks racing to the bottom by cutting interest rates to devalue their currencies. The macroenvironment is there for Gold to shine.
Just a reminder that Gold and the US Dollar can move up together due to being safe havens. I have outlined why I expect the US Dollar to move higher, and how this will cause the problems in the world to exacerbate. Also, remember that Gold priced against other major currencies (the Pound, Canadian Dollar, Australian Dollar, New Zealand Dollar, the Yen, the Yuan, and the Euro is very close) has already broken out into all time new highs in 2019. This is a sign regarding where these fiat currencies will be going.
With central banks likely to continue their easing and stimulus, calling it something else other than QE to avoid a confidence crisis, real rates (nominal rates and inflation) will be negative yielding. Another reason to hold Gold. However Gold does well in both inflationary and deflationary environments, and really boils down to it being a confidence crisis asset.
Billionaire Ray Dalio and Paul Tudor Jones have recently spoken about Gold and how one should own it. Dalio’s words on Gold and his “paradigm shift” environment may very well have lead to large institutions and hedge funds to increase their positions in Gold. These larger funds will be playing Gold in 3 ways: buying physical bullion, buying the GLD ETF, and buying positions in Gold royalty and streaming companies, which is one of the best business models invented.
Let’s get to the chart of note, and perhaps the chart of 2020.
The fundamental reasons for Gold are there as described above. The chart of Gold also has given us a nice signal and we are awaiting for a higher low for Gold, which could occur as early as January if the Fed does cut rates again. Currently, the market believes there will be no rate cuts until Fall 2020, but this can be tested and would impact Gold once more cuts become priced in.
GLD is the ETF for the Gold Miners. Our market structure analysis shows us a very exciting market. On the weekly chart, Gold has had a downtrend with lower highs and lower lows, and then we began to base and consolidate. This consolidation has occurred for 7 years and the resistance level has been tested 4 times in these 7 years. This is a very important level to watch.
As you learn in my course, all markets only move in 3 ways, and we are very likely to be breaking out into an uptrend to validate this claim. From the break I expect higher lows and higher highs. For those dubious about this pattern, take a look at the Gold weekly chart which had this same pattern. We are still awaiting the first swing on the weekly after the break and run up to a new flip zone level:
Forecasting a great 2020 for the precious metals, and I think it is worth considering positioning yourself for this now.
Like this article?
Leave a comment
British Elections, The Fed, and Donald Pump…Oh My! To learn more about profiting from market structure, visit our Market Watch page. To follow our trading