Back in late December, I showed gold stock investors some key cycle and oscillator charts for XAU/USD and the miners, suggested that the GDX (NYSE:GDX) ETF and its component stocks were set to surge 20% in a month or two, and said it was time to put fears aside and buy.
That 20% surge played out perfectly and I eagerly suggested investors sell their swing trade positions… to book the solid gain.
What’s next? Donald Trump didn’t create the wildly overvalued US stock market…but his stagflationary tariff taxes could be the “last gasp catalyst” that sends it into a financial dumpster…one with a locking lid.
Importers can pass these taxes to consumers… or absorb them and damage their earnings.
Here’s the disturbing bottom line: It likely plays out as a macabre mix of both unsavoury choices and money managers are clearly concerned.
Some stock market investors already are showing signs of outright panic, and rightfully so given the outrageous overvaluation of the market!
A look at that overvaluation basis of the Shiller/CAPE ratio. The CAPE ratio has touched 38, and it’s a long way down to the undervaluation zone of 10.
The horrifying cycle chart for the S&P 500. It basically showcases the start of an imminent (and probably terrifying) end to the American fiat-themed empire.
Some say the destruction is deserved, others say no, but what matters is that when the market finally bottoms (cyclically indicated to be around the year 2034), it could simply ooze sideways for decades… a kind of super-sized version of the terrible 1966-1982 market.
The rise of Chinese and Indian gold-themed citizen purchasing power could intertwine with the collapse of the US stock market to create a multi-decade “stagflationary gulag” for America.
The cycle averages chart shows gold is cyclically due for a pause in its magnificent rally against insidious American fiat.
The chart suggests the pause could last for 2 to 4 weeks (some cycles suggest until May) and that fits with the stock market mayhem being generated by the US government’s commitment to pound the nation’s citizens and corporations with stagflationary tariff taxes… rather than eliminating income taxes and replacing vile fiat with glorious electronic gold as the nation’s permanent currency.
Because these tariff taxes are stagflationary, they are generally positive for gold. The scenario now most likely is a brief pause in the gold market rally while the stock market begins to descend into an abyss.
Is selling gold a childish endeavour? I personally wouldn’t go that far in any statement I make, but it is the world’s greatest currency, and nearly 3 billion Chindians are obsessed with getting more. That seems wise.
The daily gold chart. The previous highs near $2800 and the low at about $2600-$2550 could be viewed as “markers of wisdom”… for investors who are eagerly prepped to buy these zones.
What about the dollar? Well, many analysts say that rather than attack citizens and corporations with his stagflationary tariff taxes, Donald Trump should have devalued the dollar against other government fiats… and they say he’s failed to do that.
A big H&S top has been forming on the USDX since he got elected. That’s hardly what I would call failure. A right shoulder rally should be next, and this scenario fits with a modest multi-week pause for gold.
From there, the dollar is likely to collapse, and gold should surge to $3200-$3500. As the stock market tumble intensifies, the Fed will be under immense pressure to cut rates… while the tariff taxes push inflation higher and pressure the Fed to hike. It’s loose-loose for the stock market and for silly fiat-oriented citizens, and win-win for those with the most gold!
What about the miners and silver bullion? Well, they tend to stage exciting rallies from many key buy zones for gold…
But not all buy zones for gold are buy zones for these more speculative plays.
Here’s a look at the important 14,5,5 Stochastics for gold basis the weekly chart. The lead line is now above 90 and the lag is at about 84. Overbought situations like this are not a concern for supreme money (gold) accumulators, but for mining stock and silver bullion enthusiasts, significant patience is required before buying those with size.
Before buying any more senior miners or silver bullion, my suggestion is to await a swoon in this key oscillator… to at least the 50 zone, and perhaps to the oversold zone down at 20.
The magnificent GDX chart. Bull flag formation is now the most likely scenario… a flag that functions as an incredible handle in this gorgeous cup and handle pattern. Stochastics is becoming overbought while the key TRIX indicator verges on a buy signal. That fits with the cyclically indicated pause for gold and a bull flag for the GDX weekly chart.
The citizens of India (1.4 billion of them) are the world’s most eager gold buyers on sales in the price. I’ll dare to suggest that gold stock and silver bullion investors in the West may be even more eager to buy when it’s soon time to do so after what is likely just a few short weeks… of awesome gold bull era time!