Central Bank Gamblers Versus Gold Stocks

The technical set-up on the gold chart was pristine, but this Wednesday’s FOMC meeting and the quarterly FOMC predictions may put a temporary damper on the bullish price action.

Originally published on June 17, 2014.

  1. Today is a very important day at City Hall in London, England. Central bank research group OMFIF is presenting a blockbuster report on public sector spending. I think that everyone in the global gold community should take note of it.
  2. OMFIF argues, quite persuasively, that governments, central banks, and sovereign funds are now holding stock market investments worth about $29 trillion.
  3. The drop in bond yields is likely behind the enormous public sector surge into equity markets.
  4. To view the OMFIF press release, please click here now.
  5. While citizens of the world are struggling to make ends meet, governments and banks appear to be engaged in a massive “price chase”, in global stock markets.
  6. Rather than invest in failing infrastructure, central banks and governments are acting like hedge funds, betting on the stock market and OTC derivatives, using fiat credits that are borrowed or printed.
  7. The bottom line: While global citizens are told to “grin and bear” austerity, their leaders are having a “good ‘ole time” spending trillions of dollars, at the stock market casino.
  8. Elderly citizens have invested a lot of money in corporate bond funds, in an attempt to get a decent payout on their savings. That’s a mistake. I’ve argued that an investor should never invest because of a personal or corporate “need”. Investment should be based on a macro view of what an asset is, not what an investor needs from it.
  9. The 1970s bull market in silver was ended when (crooked) regulators took the market to “liquidation only”. A similar demise may be in store for high-yield bond investors. “Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.” – Financial Times, June 16, 2014.
  10. If the Fed hikes rates, even modestly, that could crash high-yield bond funds, especially those using leverage to achieve their returns. If the exit doors are locked when a fire breaks out in an elderly investor’s home, how do they get out? The exit fees may be only the beginning of a policy move by the Fed, to lock the exit door on the nation’s most vulnerable investors.
  11. Please click here now. Throughout 2014, Fed presidents and governors have issued many grand predictions about “powerful” American GDP growth.
  12. Horrifically, none of their predictions have come true.
  13. Bank economists have also missed their mark in 2014. They predicted drastic declines in the POYG (price of your gold), based on the same view of soaring US GDP growth, but almost halfway through the year, gold is steady, and their predicted GDP growth has failed to appear.
  14. First quarter growth was minus one percent. Now, the IMF has lowered its US GDP guidance for 2014 to 2%, and says there is a “halo of uncertainty” about even that paltry number.
  15. The IMF is adamant that the minimum wage in America must be raised. Just weeks ago, I highlighted the move by Seattle’s government to aggressively raise wages.
  16. The seeds of powerful inflation in America are being sown by low growth, an aging population, and rising wages.
  17. On that note, please click here now. That’s the weekly chart for gold. A week ago, I suggested that most precious metals charts looked like “eye candy”. A massive “across the board” rally then occurred.
  18. The technical set-up on the gold chart was pristine, but this Wednesday’s FOMC meeting and the quarterly FOMC predictions may put a temporary damper on the bullish price action.
  19. Please click here now. A spectacular bullish wedge is still in play on this daily gold chart, although its boundaries have changed slightly. The Stokeillator (14,7,7 Stochastics series) is only at about 50, and the ultra-bullish posture of the weekly chart suggests that a post-FOMC rally of size is very likely.
  20. I’d like silver market fans to please click here now. I use sugar as a leading indicator for the silver market, and this weekly chart is very bullish. It suggests a bit more patience is required, as the Stochastics (14,3,3 series) oscillator is close to flashing a key buy signal, but not quite there.
  21. I believe a rise above $.1950 in the price of sugar, will usher in substantial institutional buying of both sugar and silver, by institutional investors who are concerned about inflation.
  22. Please click here now. Junior gold stocks are the darling of the gold community, and this GDXJ chart shows how superbly they can perform when the entire precious metals sector is in rally mode.
  23. From the recent lows, GDXJ has rallied about 15%, and it’s left the Dow in the dust over the past six months. Having said that, this short term “astro blast higher” has taken the lead line of my Stokeillator lead line to the 90 area.
  24. In the short term, junior gold stock fans should be open to the idea that prices will move sideways or slightly slower. That’s healthy for the market, and I’m projecting a possible surge to the $46 area will begin on the next upswing in the Stokeillator. I’ll be an eager buyer in the $36 area. Despite the apparent multi-trillion dollar efforts of the world’s central bank gamblers, the Western gold community’s gold stocks are handily outperforming the world’s stock market casinos. I expect that trend to intensify, in the second half of the year!
  25. Stewart Thomson of Graceland Updates, Guest Contributor to MiningFeeds.com


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