Weekend Report
Jack Davis | May 22, 2017 10:39
Originally published by Chamber of Merchants
What’s happening everyone? Hope you’re doing well and that the market has not enslaved you but rather that you are confident in your trading and vision for your future.
I have made some adjustments to my lifestyle and thought process lately but that’s for another post, another time.
Let’s talk markets…
h2 Gold/h2Of prime interest to me at this time since I am 100% loaded into the precious metal.
Way undervalued at this stage:
Gold, when taking into account the money supply, is valued at $2,687 USD per ounce.
However, we can stand at the rooftop shouting that as much as we want, demand and supply of paper gold is the short term determining factor of this underrated and arguably, the only store of wealth and value.
While we’re in a supply and demand channel which is upward trending, there is some weakness in US dollar terms. The true support is around $1196 USD:
In Australian pricing, gold has found its way back into a higher channel, with current support at $1638 AUD:
As a bonus, Canadian gold price, with support being at $1650 CAD and resistance being $1750 CAD:
During the past few weeks we have seen a see-saw of market knee-jerk reactions. It’s all much of a muchness honestly. Unless you’re cashing in on every spike and buying in low again, it is fairly irrelevant to the overall gold picture.
What’s the overall picture/ Merchant’s view on Gold?
Up. Up and Up…even if we get pull backs etc, I believe the global economy is evolving rapidly into an inflationary trap.
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The recent Australian budget for instance, is a disaster economically speaking, in terms of debt control etc. However, from a gold perspective, it’s brilliant. Essentially the government appears to pretend that they are concerned with the deficit, however, in reality, their policies show that there is ZERO intention of returning to a budget surplus. This is one of many steps toward a completely fake and imaginary economy. What it means, is that they are pursuing a Keynesian model of spending money that doesn’t exist. That money filters into the economy and gets the ball rolling again, or so they hope. While there is a stimulus effect, the government is essentially reducing their currency to be more and more worthless (oxymoron?). That means that if Citizen Joe Soap has savings, he quickly should convert his savings into something that stores wealth, such as precious metals, art etc… Savings will be reduced to ashes in the longer run and superannuation is amongst the list of casualties (although it’s among the longest running jokes of our time.)
It appears that most Western governments are quite committed to printing and inflating their monetary supply while attempting to keep the lid on precious metals and commodities. I would place PM’s in a separate category however, as the demand side of commodities appears to be grinding to a major halt, while the demand for precious metals is increasing in non-western countries such as Russian, China and India.
Let’s just say, I need to brush up on my Mandarin if I wish to be relevant a decade or two from now.
As a patron of the Chamber you should know that the USD/JPY is tightly correlated with precious metals… So how does that look?
h2 USDJPY/h2Honestly, while it appears the bounce is in for the USD/JPY which should result in a lower gold price, from the chart it looks weak in the knees which indicates to me that a stronger Yen and higher gold price are likely:
There are a few things that we all need to remain acutely aware of:
- The political boos for gold is super-temporary. Don’t celebrate any of it as it gets corrected almost instantaneously. Having said that, any surprise such as a bombing, missile strike, scandal etc is a selling opportunity for gold. That’s not my current strategy. Not interested: I have a life and am getting onto some good things so I don’t wish to do short term trades. You can, however, do as you please.
- The Trump trade may be unravelling exponentially, meaning all the feel good ideas of tax breaks, stimulus etc could be off the table, which means that the market may head for a correction.
- There is a disparity between the hard data (inflation, productivity, GDP) and the predictive models used by the government. It’s a matter of fantasy vs reality. Full time jobs are evaporating, wealth is depleting and productivity us almost at a stand still – however the market still believes the narrative that is is “transitory”… All numbers point to the trend that it’s not transitory. Hence, QE4 is closer than expected. In addition, that would be the reason why Western governments need to continue spending money that they don’t have: they need to inflate the money supply so as to keep in the exchange rates in check with the USA who is close to launching more stimulus. Make sense?
- The US dollar appears to be bucking its bull run. This is good for gold overall.
- I expect that we are months away from some excuse to print money to try and stimulate the US, UK, Australia etc… Stay tuned for whatever that may be. (War? Humanitarian Aid? Who knows… but it will come under the guise of a necessity to spend non existing funds.)
- In terms of Precious Miners… the funds are a bit broken right now…which is causing frustration in those sectors. I am not bothered by this. I am satisfied with the outlook of all my miners (Blackham Resources Ltd (AX:BLK) you better reduce that AISC!) lol (Well spotted Celeste.)
(P.S US dollar chart below…it’s due for a bounce…but if it doesn’t bounce…expect major moves in gold. Additionally, even if it bounces, it appears to be weak enough to present a possible further fall which would result in higher USD gold and US miners catching a bid. In fact the US dollar is at a 6 month low (roughy).
That’s it for now…I don’t want to overdo it.
I’ve enjoyed sharing these thoughts with you.
Think better. Relax. Make some good decisions in all aspects of your life.
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