The month of October begins with a pause in gold’s relentless rally against fiat. The pause is likely related to technical factors as well as the Oct 2-7 is “Golden Week” holiday in China. Most dealers and stores close for the holiday. The lull in demand often sees a modest dip in the gold price around the start of the holiday, and that’s in play now.
Gold’s rally began almost a year ago, from my last significant buy zone for investors (at $1810 in Oct 2023). That was the right shoulder low of a key inverse H&S pattern…
Which itself was the right shoulder of the massive pattern highlighted with a green circle on this chart. The rally has indeed been relentless, and the interesting news is that the next leg up likely features silver and mining stocks as stars of the show.
Bank analysts are looking at debt more than all the wars as the big gold price driver, and that’s likely the right thing to do. War was a factor in the gold price rallies of 2022 and 2023, but many mainstream money managers are beginning to show more concern about all the debt being accumulated by governments around the world.
Copper looks “OK” at best. Yesterday’s reversal day is a huge concern and to view an even more concerning market…
Note the bizarre and ominous H&S top action on the key 14,5,5 series Stochastics oscillator at the bottom of this chart.
I’ll dare to suggest that US growth is collapsing much faster than the statistics show. Tony Blinken talks with glee about lobbing long-range missiles into Russia while Israeli tanks pour into Lebanon and… oil falls down.
This can mean only one thing; US growth is collapsing. The 50bps cut that the Fed just did was a real emergency cut, and another one could be coming on November 7. This is incredibly positive for gold but whether it’s enough to keep the overvalued US stock market from collapsing is much more questionable.
A lot of investors (including most of the bank analysts) didn’t buy any gold in the key $1810 area, and they have missed what is now almost a $1000/oz ride.
These investors are waiting for a pullback to enter. Will they get it?
A look at some key entry zones on the weekly chart. Investors who bought nothing at $1810 and want to join the golden party now need to understand that while buying small pullbacks now will almost certainly be profitable in the short and medium term…
Eventually a much bigger wave down will occur, and it will hurt their gains. Here’s the good news:
It’s gold. Gold is the world’s ultimate currency, and almost all investors need more of it. A lot more. Small pullbacks do eventually get overshadowed by bigger ones, but when it comes to gold, those bigger dips simply need to be bought with bigger size.
The horrifying US fiat versus gold chart. Unfortunately, most people who gravitate towards gold tend to view it as an investment like the stock market, rather than as the ultimate currency that it is.
So, they believe their mission is to buy a chunk of it, and hope it rises in price against their government fiat money. In contrast, most Asians (especially in India) view their mission to be using fiat money to get more gold, and it’s a mission with no end. This chart shows that the Asian approach has been the most solid way to approach gold.
Investors who have no gold should generally buy modest amounts on 5% sales that end with the price roughly at modest support zones on the chart. Silver bullion and mining stocks can be bought there too.
A look at a key weekly chart for GDX (NYSE:GDX). It seems almost surreal that GDX is still trading below its year 2020 high while gold bullion is about 30% higher, but this inverse H&S pattern suggests GDX is poised for its own rocket ride… to a target price of about $60.
Whether the breakout above the neckline zone happens this week or not is likely determined by Friday’s jobs report.
There have been so many downward revisions that some money managers may not even believe the data if it shows jobs being created to be strong.
Whether it’s Powell chopping rates so the government can borrow more or the government capping credit card rates so consumers can borrow more, these “solutions” are all about adding more debt, making what is out of control now… even more out of control.
This is likely why GDX is so technically strong, and so poised to surge to $60, regardless of whether it pulls back to $36 first or not.
The spectacular long-term abrdn Physical Silver Shares ETF (NYSE:SIVR) chart. I’ve dubbed silver bullion as, “Prince Hi Ho”, and every technical item on this chart says… up we go. Silver sports the same massive inverse H&S pattern that gold has already broken out of, but it’s much looser for silver.
Not every pattern that appears on a chart is an exact Edwards & Magee textbook event. For example, lines of importance can be drawn that may, or may not be, the neckline of a huge H&S pattern. What can be said is that there is incredibly positive inverse H&S and bull flag “action” on this silver bullion chart, and as the gold bull era progresses, silver bugs can be sure their mighty metal will play a very exciting part.