- There has been an uptick in market risk over the past couple of weeks, and that’s being reflected in dollar-yen and dollar-gold.
- Please click here now. Double-click to enlarge this dollar versus yen chart.
- The 109.50 area on this chart is quite important for gold investors. If the dollar falls under that price zone, gold is likely to surge to above $1300.
- Please click here now. Double-click to enlarge. Gold looks technically solid here in the middle of the soft demand season. There’s a bull wedge in play, a Stochastics buy signal, and a small double bottom at about $1268.
- The U.S. stock market is entering its soft season (May-October) but gold’s strong season really doesn’t get underway until August. Investors should exercise patience but there’s little cause for gold market concern.
- Gold stocks were slightly higher earlier this week with the Dow Jones down about 500 points on negative trade negotiation news. That’s positive action for these stocks!
- The U.S. and Chinese governments are close to announcing a trade deal, but it comes late in the U.S. business cycle and at the start of the stock market soft season.
- A trade deal would likely benefit the Chinese stock market. That’s good news for gold and gold stocks. Chinese investors are in a “so-so” mood right now. A trade deal would put them in a great mood, and when they are in a great mood they celebrate by buying lots of gold.
- U.S. growth stocks would likely benefit as well. In the big picture, the Chinese stock market gets badly hurt by tariffs and the U.S. stock market gets badly hurt by QT and rate hikes.
- I’m adamant that even the most diehard gold bug should have some capital in the U.S. stock market, bonds, and real estate. Even if it’s just 10% of a gold bug’s portfolio, it’s important for all investors to hedge their bets.
- For mainstream investors, gold is the hedge. For gold investors, stock markets, government bonds, and real estate are the hedge.
- Investors who put all their eggs in one asset class tend to be driven by emotion. If the stock market soars, they curse gold and chase the stock market. If the stock market falls and gold soars, they sell their stocks and buy gold. That’s not going to build sustained wealth in any asset class. It’s destructive action.
- Whether there is a trade deal or not, gold-oriented China is going to keep growing at twice the GDP growth rate of America for a long time, and gold-obsessed India could grow at three times the U.S. growth rate for even longer.
- What this means for gold is an evolution of the asset class, from a simple U.S.-based fear trade hedge to a more sophisticated globally-endorsed asset that rises against all fiat in good times and bad, and swoons rather than crashes during setbacks.
- The evolution is real, but are investors aware?
- Please click here now. Double-click to enlarge this TLT-NYSE bond ETF chart. It has my Graceland Updates proprietary buy and sell signals annotated on the chart.
- Gold is the ultimate risk-off asset class, but T-bonds are a very good indicator of stock market risk. I have a buy signal in play for bonds as the stock market weak season begins.
- Please click here now. Renowned economist Joe Stiglitz notes that while U.S. corporate capital expenditures did rise substantially after the Trump tax cuts, stock market buybacks were about 20% higher than those expenditures.
- Stiglitz appears overly-critical of Trump, but he is correct that the huge buybacks versus expenditures spread is concerning.
- The U.S. economy is reasonably solid, but a lot of the stock market gains are more related to these buybacks, manipulated interest rates, and QE rather than to corporate earnings and overall economic growth.
- In a nutshell, there is risk in the market that needs to be respected, especially as the stock market’s soft season begins.
- Please click here now. Double-click to enlarge this GDX daily chart. There’s a fresh bear flag in play, but there’s also a large bull wedge pattern appearing.
- With Stochastics the most oversold since September, any pullback this week is likely to be contained by the bull wedge formation. GDX could be making a seasonal low, here in the $19-$20 price zone.
- The bottom line for gold, silver, and the miners is that the market has already evolved to the point that soft season price declines are of no concern. My suggestion is to focus on short term trading in the soft demand season and core position capital gain in the strong season!
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form giving clarity of each point and saving valuable reading time.
Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualified investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:
Are You Prepared?