We are presently engaged in an epic battle involving the gold price. So what is it all about? What is so epic? You should know that gold bottomed back in December and the precious metal (PM) stocks bottomed in January. Since this bottom the stocks have simply been on fire. I have classified this as a Phase I advance where stocks return to “Known Values” after having been left on the bargain table throughout the fall of 2015. The Phase III of the previous bear market had so compressed these stocks that they resembled a beach ball held under water. Well, on January 20th 2016 Mr. Market lost his grip on the ball and it has been in an upward impulse seeking known values ever since. In this period we have witnessed a rare phenomenon, one that occurs but a few times in ones operative investing years. That is a phase shift in market dynamics. The old model permitted the market circling back after an advance, thus allowing latecomers a place on the train. This bull, however is operating under different rules. The result has been a multitude of sold out bulls sitting on the sidelines, developing bullcers, waiting for a pullback to get in. Sorry gang, this bull doesn’t grant “gentleman entries” to people who don’t get it. Gold is NOT doing what it has done for NO reason! There is an unseen fire burning in the world’s monetary system and we are now set-up for a BACKDRAFT erupting into a conflagration with gold acting as your protector. That’s the message gold sees and the Battle for the Matterhorn is set to “blow the roof off” and expose the inferno underneath.
The Battle for the Matterhorn is now upon us. The Matterhorn of course is the spike top in gold back in January of 2015. It was the footprint of the last bear market rally of the previous bear market. Back then the gold paper market held sway over the physical market. So as massive short selling was applied to put out the fire it stopped gold’s advance in its tracks. Commercial interests were able to collude and smack the gold price back down in quick order. What the Battle of the Matterhorn today is all about is the reality that the tables have now been turned. In the intervening period the physical market has been competing for dominance to the paper market. If the physical market can assert this newly dominant role then it will scale this peak and announce to the world gold’s preeminence to paper. Yes, folks this is EPIC.
Sometimes a chart simply jumps off the page and communicates its message. That’s what we have here in this stunning textbook example of a cup and a handle. Not just one, but a double C&H fractal. Its almost like gold is snubbing its nose at the paper shorts in arrogant fashion. It’s as if Clint was saying go ahead….make my day! Its all in the chart folks. If the paper shorts can’t hold the line, what kind of explosive upside is in store?