Gold

Gold-Stock Head Fake?

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By Adam Hamilton – Re-Blogged From Gold Eagle

Gold miners’ stocks blasted higher this past week, breaking out of their correction downtrend.  Rapidly-improving psychology fueled such strong upside momentum that sector benchmarks are challenging months-old upleg highs.  Most traders assume this is righteous, that gold stocks’ next upleg is starting to accelerate.  But key indicators argue the contrarian side, that this breakout surge is a head fake within a correction.

In early September, a major gold-stock upleg peaked after soaring higher on gold’s decisive bull-market breakout in late June.  The GDX VanEck Vectors Gold Miners ETF, this sector’s leading benchmark and trading vehicle, had powered 76.2% higher over 11.8 months.  It crested the same day gold’s own upleg did, hitting $30.95 on close.  That major 3.1-year high proved the apex of that impressive gold-stock upleg.

Gold started grinding lower after its own September 4th upleg zenith of $1554, capping a massive 32.4% run over 12.6 months.  The gold stocks corrected with gold like usual, as these miners are essentially leveraged plays on gold.  Since their earnings amplify gold-price changes, the major gold stocks dominating GDX generally leverage gold by 2x to 3x.  So the gold stocks drifted lower over the next several months.

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Is the Monetary Reset at Hand

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By Chris Powell, Money Metals News Service – Re-Blogged From Headline Wealth

For most of this decade owning gold and gold-related investments has required the patience of Job, and the sector is so obscure that it is hard to be sure of anything.

But for months now the unusual developments have been piling up so much that it may be possible to regain some optimism.

There are indications of a shortage of metal not just at the New York Commodities Exchange, where for months now most contracts have been settled through a supposedly “emergency” procedure called “exchange for physicals,” but also in London, the hub of the world gold market, where the usual flow of metal to Switzerland recently reversed, with metal flowing back to London amid increasing demand.

This corresponded with announcements of gold acquisitions by central banks that had not shown any interest in gold.

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Fed’s Fake Stock Markets

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By Adam Hamilton – Re-Blogged From Gold Eagle

The US stock markets soared in 2019, blasting to dozens of new all-time-record highs.  Euphoric traders attributed these massive gains to strong corporate fundamentals and US-China trade-war progress.  But the real driver of stocks’ astounding ascent was the Federal Reserve’s epic extreme easing.  A panicking Fed pulled out all the stops to goose and levitate stocks, leaving fake artificially-inflated markets in its wake.

This year’s huge stock-market rally delighted nearly everyone, generating widespread euphoria.  That made Americans feel wealthier, leading them to spend more freely.  That pushed corporate sales and profits higher than they otherwise would’ve been.  Speculators and investors loved the easy largely-one-sided gains.  And stocks’ biggest fan, Trump, reveled in what lofty record stock markets implied about his policies.

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The Man Who Vanquished Gold

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By Joseph T. Salerno – Re-Blogged From Gold Eagle
[As I remember from those days, Volker’s FED consistently was behind the curve. He raised rates only when market rates kept shooting higher. And, after being several points below market rates, he kept raising rates until the market turned, leaving the FED several points above market rates. –Bob]

The flood of obituaries that noted the passing of Paul Volcker (1927–2019) last week have almost all lauded his achievement as Fed chair (1979–1987) in reining in the double-digit inflation that ravaged the US economy during the 1970s.

Volcker was referred to as the “former Fed chairman who fought inflation” (here);  “inflation tamer” and “a full-fledged inflation warrior” (here); and the “Fed chairman who waged war on inflation” and led “the Federal Reserve’s brute-force campaign to subdue inflation” (here).  Mr. Volcker certainly deserves credit for curbing the Great Inflation of the 1970s.  However, he also merits a lion’s share of the blame for unleashing the Great Inflation on the US and the world economy in the first place.  For it was Mr. Volcker who masterminded the program that President Nixon announced on August 15, 1971, which  unilaterally suspended gold convertibility of US dollars held by foreign governments and central banks, imposed a fascist wage-price freeze on the US economy, and slapped a 10 percent surcharge on foreign imports.

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Gold Correction Not Over

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By Adam Hamilton – Re-Blogged From Gold Eagle

Gold has been correcting following last summer’s powerful bull-breakout upleg. Since peaking, gold has inexorably drifted lower in a well-defined downtrend. Traders are wondering when this necessary and healthy sentiment-rebalancing selloff will bottom, paving the way for gold’s next upleg. But this correction still has a ways to run, according to speculators’ gold-futures positioning which dominates gold’s price action.

Gold has enjoyed a strong 2019, still up 15.0% year-to-date as of the middle of this week. Unfortunately its gains have been overshadowed by a bigger stock-market surge, driven by extreme Fed easing. This central bank shifted its rate outlook from hiking to cutting, made 3 rate cuts in just 3.0 months, and birthed its massive 4th quantitative-easing campaign to monetize Treasuries! That’s incredible in just a half-year.

The resulting stock-market euphoria from the hyper-easy Fed squelched traders’ interest in gold. Yet it still enjoyed a strong surge after breaking out to its first new bull-market highs in 3.0 years in late June. Over the next 2.5 months it blasted 14.3% higher, a major move compressed into such a short span of time. That climaxed a bigger 32.4% upleg that unfolded over 12.6 months, the largest of this secular bull so far.

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