Goldtent TA Paradise

How low can you go ? Total global collapse/depression or a rapid recovery on surging demand recovery ?

It’s hard to gauge the PM market reaction to rate cuts and huge stimulus measures, and even harder to know the extent and duration of global, Coronavirus induced trade paralysis. $1400 gold and $14 silver would give a GSR of 100, and set up a very low risk entry point.

Just how bad could this get ? I guess many of you know I’m a weather forecaster, but what I’ve not said, is that my current role is ‘Civil Contingency Advisor’. For those outside the UK, we had an act of Parliament back in 2004 – the Civil Contingencies Act. It lays out what is expected of the Emergency Response Community during times of national emergency (natural disasters, terrorism, pandemics etc). I’ve spent the last 8 years working with fellow emergency responders to help put plans in place for all of these (seemingly unlikely) eventualities. Many of them have indeed happened, and the plans, which are practiced and tested regularly, prove invaluable during the response and recovery phase. The pandemic flu plan has been well rehearsed, and the UK government has announced a range of measures as a ‘first step’ along with some very heavy hints as to what may come next. As reported by the BBC, ‘no tactics will be off the table‘ these include  isolating entire communities, ‘discouraging’ use of public transport and instructing people to ‘work from home’ – basically what is happening in northern Italy at the moment. In the fight to contain the virus, the country could come to a virtual halt economically. I assume this is the same for the whole of Europe, the US, the Far East and, in fact everywhere. Just let that sink in for a moment. Total economic collapse for a period of weeks, if not months. That would lead to a financial catastrophe the likes of which nobody living today has ever witnessed.

All of that may be prevented of course, and it’s very much a ‘reasonable worst case scenario at this point. The human cost could become very large, but I do find it interesting that the numbers on this page https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6 have increased very little over the last couple of days.

From an investing point of view, I remain firmly (very) bullish on gold as a result of the extraordinary amount of stimulus and rate cutting that is now certain to come. Golds monetary role should come to the fore as currencies around the world are further debased. Silver will only perform well, if it too, begins to assume a ‘secondary’ monetary role. At this point in time it’s behaving like a commodity and (like copper for example) taking a big hit.

Looking further ahead, I can imagine a surge in demand following a period of enforced shutdown, so a ‘V’-shaped recovery is possible, unless we see the global economy deflate to the point of a prolonged global recession, or perhaps I should say, depression. Bottom line – I favour gold as a store of value during times like this. Silver may fall further before recovering. As for gold stocks – further downside is possible/likely, but as gold holds its ground, I’d expect them to out-perform the stock market by a wide margin.

What a mess we’re in.

Occasionally there are some articles of value on this site https://www.zerohedge.com/markets/why-bear-market-will-lead-dollar-collapse

For anyone who can’t get over the action in PM miners last week, and can’t put it into context it’s a case of a) getting out of this sector permanently or b) grow a pair

I say that because this will happen again, more than once – just look at what it took to get from 35 to 650 on the HUI Index during the last PM bull market. I’ve said repeatedly that I don’t think I can time things well enough to repeatedly exit and re-enter. The ONLY drop I’m hoping to avoid is the fall into the 2034/24 mid-cycle low (look back at 2008). Other than that I’m just going to grit my teeth and ride this up from my entry point (which was around 140). Please look at this chart and inwardly digest those huge drops. Mentally prepare for them, and ignore them (if you believe, like I do, that we are in a long term. secular PM bull market). If you don’t believe that, you should avoid PMs because gold is going to $800 and silver is going to $5.

Clearly, last week was shocking, but the big picture is now even more bullish for PMs. Rate cuts, more rate cuts, and who knows what other stimulus will be tried to shock this corpse back to life. I think we’re starting to see why these bowl patterns have been developing. They’ve been there for some time now, building out the right-hand of the bowls. You can see that gold and silver need to drop a good deal more just to touch these bowls again. That may happen, it may not, but they are showing us the route back to the old highs and beyond. Way beyond. Keep the faith.

This cannot and will not be allowed to continue…

Stock markets across the planet are in the same predicament. So some kind of coordinated global response is coming. The question is what ? and will it save the market ?

The ‘what ?’ part of it is likely to involve interest rate cuts and some kind of stimulus package. I’m not even going to try to second guess what economic poison they’re going to come up with. It’s poison because, simply trying to goose this market higher is not the answer. A very large purge is required if we’re going to see a true reflection of market ‘value’. So much credit and debt swilling around this patients body, it’s been on life support for years. So, in my view, whatever is ‘cooked up’ by the great minds of our time, it won’t solve the issue. The issue being one of simple mathematics, and the inescapable fact that debt to GDP levels are passing a point of no return, and the monetary black hole is inescapable – even negative rates will only make matters worse.

Utter carnage in the precious metal space as well. The GDX chart is simply broken…

and yet…I can’t quite give up on it. Is it me being simply foolish, or do the fundamentals still matter ? Take a look at the Gold/Silver ratio chart…

Silver is either going to simply continue to crash (at a faster rate than gold), or that upper resistance line will prove to be important. We’ll know the answer to that next week. Something we found out this week though (and just about the only crumb of comfort I can find at the moment). My old friend the ‘Do(o)med’ US Dollar chart is back on the table…

I keep coming back to this chart. I know I’m in the minority, but, just imagine what might happen to the DXY if it becomes clear how fragile things are in the US, with the Fed having to change their guidance from ‘everything looks ok’ to ‘everything is a sham and we need a package bigger than anything we’ve ever seen before, including negative interest rates to try and keep this charade going’. How will precious metals react then I wonder. Worth careful consideration I’d say.

I’m happy to admit, I just didn’t think PM’s would be hit quite as hard as this. The Dollar was going up and gold has been going up with it for the last 2 years. Now that the Dollar has turned down, and the stock market is crashing, PM’s are being slaughtered as well. It appears it’s just gone too far and everyone is pulling out of everything and into cash. In this scenario, anything is possible. However, with all the panic in the air, I’m going to focus on the critical chart pattern we’ve been following for years now. As long as it’s not broken, there is still hope that the upcoming, massive, global money-printing that will be needed will light that fire once again…

Incredible moves in the stock market. Catch a falling knife anyone ? I’m holding firm in my belief that the PMs will react in a big way to the upside…

Gold and Silver look ready to move higher…

So, what a mess we’ve got ourselves into. Firstly Coronavirus is a human tragedy for all those poor families losing loved ones around the world. I must admit I’m finding it hard to gauge the seriousness of the virus in some respects. This partly comes from the seemingly small proportion of the Chinese population that seem to have suffered (bearing in mind the population of around 1.4 billion). It was reported on the BBC today, that plans were in place to prepare for 80% of the UK population (66 million) to contract the virus. That may be a reasonable worst case, but that would suggest a possible death toll of over a million (2% of 52 million).  It’s very hard to know whether we need to be mildly concerned, or something more. I suppose it’ll become much clearer in the next few days. If we get a moderate spread and human to human transmission rate, we could certainly be facing an economic shock beyond anything we’ve seen in our lifetimes.

I posted on Twitter this morning that I had exited crypto positions with a small profit, and someone described it as having ‘weak hands’. I prefer to see it as being prudent and finding the door before the stampede. My thinking is that if many are forced to take time off work, or even think that might be the case, then it could lead to some large withdrawls to get access to cash. In any case, they have continued to fall today. For those who can stomach the losses, the big picture remains bullish until or unless the support lines are broken to the downside.

Interestingly the US Dollar has dropped somewhat (but not dramatically yet). I’ll reserve judgement on that until the end of the week.

For PMs the story seems to be one of ‘hold your nerve’. The charts look just as good as they did a few days ago. My thinking here is that as economic damage is done to already weak and vulnerable economies around the world, governments are likely to intervene, which, in my view, is PM positive. Anyway, here are the charts for gold, silver & GDX…

I’m afraid this really isn’t looking good. We’re getting clusters and outbreaks all over the planet now. It looks like the attempts to contain it have failed. I pray I’m wrong.

If this becomes a global pandemic the number of deaths will be huge and the impact to global GDP will be staggering . To avoid a simultaneous global economic collapse, there would need to be unprecedented financial intervention by governments and world banks.

1-2% mortality rate is what we’ve been told (based on the experience in China). But just how trustworthy are the Chinese statistics ?

As of now there are approximately 50,000 cases, with over 9000 classified as serious or critical (data from worldometers.info)

Towns and cities across Europe are now seeing measures being put in place, as well as the Far East, the Middle East and I’m sure everywhere else soon. As a precaution I’d recommend having enough provisions to see you through an extended period when it’s not easy to get hold of the things that you take for granted in daily life. I really hope it’s not necessary.

Waiting for the monthly close on Friday…

3 possible ways of reaching escape velocity in the next 12 months or so…

Still expecting $21-$22 in 3 to 4 weeks

It’s been my view for some time that we wold be approaching $1800 gold and $20-$22 Silver by March/April. Now that we’re getting closer, I can narrow it down to roughly the 3rd week in March. Here’s the chart…

But which of these 3 routes to those new highs do you think we’ll take ?

My suspicion is option 1, the Euro route. All 3 have one thing in common. They all got through resistance, one way or another and are all at new all-time highs. What a load of bull.

Maybe, maybe not, but it looks promising from here. Double your money in  a few months ?

It’s a simple question, and charts like this should have been giving you the answer for a long time now…

As a weather forecaster, I’m used to reading a barometer. As most of you will know, gold acts as a barometer as well. Like the meteorological instrument, it just sits there, static, reflecting what’s happening in the world around it. Gold has been showing a steady build of pressure. That enormous basing pattern and all of the global breakouts in gold price should’ve been setting alarm bells ringing. I can’t tell you just how bad this is all going to get, but gold is saying we’re at high risk of some very difficult years ahead.

Ken S mentioned the ‘cup & handle’ which may be forming. It’s enormous – many years in the making. It got me thinking back to how it was I started to identify this ’rounded base’ theory for the 16-year gold cycle low. They’re obvious with hindsight, but, just for fun here’s a selection of my charting antics back to June 2018 when I was beginning to perfect my ideas…

I hope all of this has helped to keep some of you on-board. As the golden bowl nears its end, we’re going to need to get a new roadmap out. I’m going to have to have a long think about that lol 🙂

Anyone recognise this type of chart pattern ? The declining resistance/rising support/arc combination seems to be everywhere at the moment (apart from the stock market lol).

I really hope everyone gets it now. I posted the first chart when gold was $1343 and lots of people said the ‘extreme’ COT positions were bearish. Utter garbage. These COT positions are EXACTLY what we need, and what you expect in a gold bull which is set to last for many years…

…for goldbugs like us anyway. Just how high will this leg take us, and when do I need to step aside ?

As you all know, I’ve been predicting that the ‘golden bowl’ or ‘arc’ will take us back towards the old highs. I think it’s safe to say that it’s pretty much done its job now, and we have a date with that $1700-$1800 area. I don’t know about you, but I want to be ready this time. Ready to take profits close to this particular top. I think it’s reasonable to expect a bit of a fight to get past the old highs and up to new all-time highs, with a decent consolidation/pullback likely.

Looking back at how the last great bull run performed can give us many clues. You can see from my chart, that price became extended about 35-40% above the supporting moving average on the monthly chart, during the bigger runs. With that moving average currently sitting at around $1422, the sum is pretty easy and gives us a figure just above $1900 ! On that basis, and considering the current positions of the technical indicators, I now believe my $1700 + target is about as much of a ‘nailed on certainty’ as you can get when predicting the future. I’m edging towards an expectation closer to that $1900 figure. If this turns out to be the case, we can expect that very large move in the mining indices, and silver will certainly move to the $21-$22 region (I wouldn’t rule out a ‘moonshot’ to the next resistance zone of $26-$28.

Exciting times indeed, but sadly it’s the terrible state of the world around us which is driving all of this, lest we forget. Anyway, here are the charts…

Edit: Silver chart added

This chart is perfectly positioned for silver to take off…