Tuesday, January 13, 2015

GOLD GOES TO $1550: here's why


I'll start with three charts:



Gold has broken out +3SD in Euros, is the highest it's been in 16 months, and is up 8% since November.




Gold has broken out +3SD in Pounds, is the highest it's been in 10 months, and is up 10% since November. 




Gold has broken out +3SD in Swiss Francs, is the highest it's been in 15 months, and is up 10% since November.

That's three nations of white-ass honky crackers who now have good reason to be long gold.

If they stop being short gold and start being long gold, the price of gold should rise faster.

Eventually it'll start rising noticeably in American dollars, and when that happens, American traders will have to close shorts and go long, no matter what their silly TIPS and 10s-2s models say. The chart is the chart, and you buy the thing that's going up.

I guess one thing that could stop this dynamic is the announcement of an incredibly strong (Shinzo Abe style) QE in Europe, but I sincerely doubt that'll happen: the Germans are quite happy to have 0.2% domestic inflation and would hate the idea of making lives easier for swarthy Mediterraneans who don't even show up on time for a dinner engagement. There's no way they would go full Abe, and at this point depression has taken such strong hold in Europe that anything less won't work.

Eventually an upward price improvement will mean money flowing back into the gold ETFs, which will change the supply-demand dynamic pretty quickly: even 100 tons means a 5% flip from supply to demand. Also, as price rises, scrap selling tends to drop off: a drop in scrap of 100 tons will mean a further 5% flip.

Those little flips in the supply-demand numbers could make gold move quickly, and it seems like the next island of price stability is the $1550-$1700 region.

I'm not saying this will happen, and I'm not promising it for this year. But what I am saying is, if you're one of those goldbugs who's been sitting on the sidelines waiting for another chance to make a quick 100% on shitty miners, then you should be watching these gold price charts like a hawk.

I eagerly await Jeffy Currie's new $1550 price target on gold.

2 comments:

  1. Just looking at phase space diagrams, there is an enormous knot to get through in the 1200-1400 range, but above that it is clear to just below 1600. Just heading out, but will post something on this later

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