Will Gold Continue Its Bull Market Toward $1500?

Gold has a clear presence in a world dominated with global economic uncertainty

My analysis shows that gold will be utilized to protect global purchasing power…and to minimize losses during the upcoming periods of market shock. It serves as a high-quality liquid asset to be used when selling other assets would cause losses. Central Banks of the world’s largest long-term investment portfolios use gold to mitigate portfolio risk in this manner. Moreover, they have been net buyers of gold since 2010.

Investors should make use of gold’s lack of correlation with other assets, which makes it the best hedge against currency risk. There was a huge trend change in US gold investment last May 2016. Switzerland is now a major source of US gold exports. The tables turned back in May 2016 as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs and Funds.  The Swiss exported far more gold to the US in May 2016 than they had in any other month going back several decades (as the next chart shows).

Though we are in for a period of great financial turmoil, investors can safeguard themselves by investing smartly in gold. Do not be left behind to see your dollar assets lose value. History is testament that during similar periods, gold was the only investment which appreciated under identical conditions.

Gold will continue to perform its role as a safe haven in these times of crisis, which appear to be never ending. The price surge of 8.1 percent on the day of the “Brexit” vote last month is an indicator that its luster of safety is undimmed in the current market. Nonetheless, there's little to be gained from arguing whether such beliefs are right or wrong: “The market can stay irrational longer than you can stay solvent”.

The list of prominent hedge fund managers backing gold is lengthening.  Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical way to offset the dire effects of many years of quantitative easing.

"It's a glaring warning sign of deflation. We've never really had deflationary fears throughout such a widespread part of the world before," said Phil Camporeale, a multi-asset specialist at JPMorgan Asset Management.

These accommodative Global Central Bank policies have led to monetary easing policies that have been adopted globally. It is not so much that the US Dollar has become strong the last few weeks. The systemic uncertainty of the recent “Brexit” vote in the U.K. resulted in the US Dollar becoming a safe haven.

The Fed is doing everything in its power to prevent a rise in the dollar. The Fed is willing to orchestrate any scenario where the stock market continues to soar with a view to have people feel a “wealth effect” from new stock market highs. This serves as ammunition to fight the argument that the economy is “contracting”. The Fed is getting everything it wants in this regard -- and therefore will continue to do so.  The number one priority of the Fed is debasing the US Dollar.

Nevertheless, gold can rise…even if the dollar continues to rise.

Investors of all levels of experience are attracted to gold as a solid, tangible and long-term store of value that historically moves independently of other assets classes.

Gold’s importance even in today’s environment was clearly visible during the massive rally during the first six months of this year.  While all other asset classes were tanking, investors piled into gold on the scare of a likely world financial crisis.

In addition, talk of further “unconventional” monetary policies globally has increased. Japan has reached the limit of negative interest rates and quantitative easing. Consequently, the Bank of Japan may adopt a policy of so-called “Helicopter Money”.

Dr Loretta Mester, President of the Federal Reserve Bank of Cleveland and a member of the rate-setting Federal Open Market Committee (FOMC), signalled direct payments to households and businesses to stoke spending is an option Central Banks might look at…in addition to interest rate cuts and quantitative easing.

However, back in April 2016, if you have followed my recommendations, you would have maintained that once gold crossed the $1190/oz. levels, it was destined to go higher. Above the downtrend line, which acted as a resistance from 2013 and onwards, the trend altered.  Furthermore, it appears to be extremely highly unlikely that it will reverse downwards, at all!

Recently, the Head & Shoulder price formation tested my resolve to buy into gold, as it is on-balance a most reliable bearish pattern.  However, once a bearish pattern fails, it becomes very bullish, which is what happened in this case. I was quick to alert my subscribers to buy as soon as the pattern was triggered. 

"We're always assessing tools that we could use," Dr Mester said in response to a question about the potential use of “Helicopter Money”. However, Dr Mester signalled that in the event of another shock or economic downturn that the most likely option would be more quantitative easing-style money printing.

Global Government Bond Rates Are Negative

Global interest rates are at zero to negative. Consequently, money will continue to chase gold and US Treasuries for the higher yield. This will continue to push yields lower as the global economy continues to slow. What would cause this to reverse? It would require either an economic rebound or a complete loss of faith in the US to pay its debts.

Addicted To Debt

The total amount of government bonds in the world that have negative yields are currently $13 trillion, according to Bank of America Merrill Lynch. Given that there were almost zero negative-yielding bonds just two years ago, this rise is incredible. Do not be surprised to see $15 trillion to $20 trillion worth of negative-yielding government debt by the end of this year.  The yield on short-term government include: Switzerland.  Belgium, Denmark, France, Germany, Japan, and the Netherlands. They are all sub-zero. Even short duration US bond rates are barely above zero. Investors are currently buying them for their capital appreciation rather than their coupon payments.

Although gold is currently in a correction, the shiny yellow is set to surge much higher and surprise ALL.  As you can see from the chart below, I am targeting 135 level on GLD.

Global Central Banks have yet to ‘manufacture’ inflation!  This trend will continue to grow for now, until just like in 2008 when the bubble bursts in cataclysmic fashion.

The Central Banks are manipulating the fabric of price-time by reversing the flow of time via negative interest rates. Therefore, the global financial system no longer possesses the productive capacity to generate any income to sustain current equity asset values.

The end of the Great “Keynesian” Experiment is upon us. Follow my lead as we navigate through the various financial markets using cycle price forecasting, technical analysis, my secret pre-market price spike intraday trend indicator for accurate swing trades and long term ETF investment positions.

Courtesy of www.TheGoldAndOilGuy.com