If we want to know where Gold is going we should follow Gold. Right?

How about following gold stocks? At times, they lead Gold.

What about the U.S. Dollar? Wrong!

In 2019, one market more than any other will impact Gold.

That is the stock market.

History argues (within the current context) that when the Federal Reserve ends its rate hikes, Gold’s downtrend will be over and when the Fed cuts rates, the bull market shall begin.

Fed policy is dictated by economic data and financial conditions which of course can be reflected by the stock market, which is also a reflection of corporate profits.

Extended weakness in the stock market should bring the Fed that much closer to rate cuts. However, if the stock market is able to mount a decent counter trend rally in 2019, it could raise the possibility of another hike. Right now, the market expects no hikes in 2019 and even half of a quarter point cut in 2020.

Other than the cyclical bull market of 1985 through 1987, Gold has never enjoyed a real bull market without outperforming the stock market.

Below we plot Gold and Gold against the broad stock market (NYSE). Gold is still trading below a confluence of resistance ($1260-$1270) and the Gold to stock market ratio, while trading above its 200-day moving average has not broken out of its downtrend yet.

As we pen this, the stock market is breaking lower but Gold is also down and remains below a confluence of resistance at $1260-$1270/oz.

Is our thesis wrong?

The current weakness in equities has not completely changed Fed policy yet. Sure, the weakness in the equity market definitely could cause the Fed to pause its rate hikes and the market has already discounted that for 2019.

However, for the bull market in Gold to be ignited the Fed needs to move from a pause to the start of rate cuts. The current talk is about a pause, not rate cuts.

Hence, Gold is catching a bid and starting to perform better in real terms but has not reached bull market status yet.

Until Gold proves its in a bull market (and the market begins pricing in a rate cut) it would not be wise to chase strength. There will be plenty of time to get into cheap juniors that can triple and quadruple once things really get going. To prepare yourself for an epic buying opportunity in junior gold and silver stocks in 2019, consider learning more about our premium service.

1. The dollar and the US stock market may be starting their next major legs down today. Please click here now. Double-click to enlarge this ominous US dollar versus Japanese yen chart.
2. Central banks around the world are ramping up their tightening.  Back in 2013-2014 when I predicted quantitative tightening and relentless rate hikes were imminent, almost nobody believed me.
3. I promised that this tightening cycle would be like no other because of the enormous size of the QE money balls in Japan, Europe, and America. The tightening action is moving the money balls out of the deflationary government bonds asset class and into the inflationary fractional reserve banking system.
4. Powell just raised rates again and is poised to launch another increase in quantitative tightening.  He’s also beginning to change the spread between the Fed funds rate and the excess reserves rate that banks get paid to keep money at the Fed.  Going forward, I expect him to put much more pressure on banks to move money out of the Fed.  This is highly inflationary action.
5. Please click here now.  Double-click to enlarge.  The US stock market looks like a technical train wreck.
6. For the stock market, one mainstream money manager just referred to the global tightening cycle in play as akin to a sports team losing their goalie!  
7. It’s obvious that the stock market is doomed.  Powell appears determined to push through another rate hike in either August or September. Maybe the market staggers sideways or slightly higher until then, but the US stock market train is headed towards a global central bank tightening cliff.  It’s going to go right over that cliff and implode, and tariffs are just icing on the cake.
8. Please click here now.  Double-click to enlarge this interesting T-bond chart.  Stock market money managers usually buy bonds when they panic, and that’s starting to happen now.
9. This time they are jumping from the fire to the fry pan.  They believe the Fed will blink and stop hiking.  In contrast, I predict the hiking will be accelerated, with a possible half point hike coming in December as inflation continues to rise.
10. Because of the widening spread between the Fed funds and excess reserve rates, banks will become more aggressive about moving money out of the Fed.  Ultimately, the money managers will panic-sell bonds and buy gold as they see the stock market melting but inflation getting even stronger.
11. The bottom line is that Powell’s tightening actions to date have not done enough damage to the bond market to kill it as a safe haven for stock market investors.  That will change fairly soon.
12. Please click here now.  Double-click to enlarge this GDX chart.  Gold stocks continue to meander sideways in my important $23 to $21 accumulation zone.
13. Many individual miners have started to trade independently of the ETFs and mine stock indexes, and are staging fabulous rallies.  There are always some outperformers in a sideways market, but the large number of them staging these rallies now is quite impressive.
14. Note the strong volume bar that occurred on Friday.  Gold stocks are in very strong hands now at a time where some possible “game changing” news is coming for bullion.
15. On that note, please click here now.  India and China are the biggest markets for physical gold, and price discovery on the COMEX and LBMA ultimately relates to changes in demand there versus mine and scrap supply.
16. When Narendra Modi got elected as India’s prime minister, he put Arun Jaitley in charge of the finance department.  This was disappointing, because Jaitley’s actions and words have been very negative for gold, and the finance ministry has the power to set the gold import duty.
17. Jaitley has a long history of health issues, and he just had a kidney transplant.  Piyush Goyal has been appointed as “interim” finance minister. He’s pro-gold and fought against the import duty.  There are rumours that his appointment may become permanent.
18. If that happens, I think gold investors around the world are going to watch the import duty tapered to zero just like American QE was tapered to zero.
19. Please click here now.  Double-click to enlarge this spectacular long-term gold price chart.  The Indian finance ministry is the main driver of the global gold price doldrums that have been in play for the past seven years.
20. It’s unknown if Goyal takes charge of the finance ministry on a permanent basis, but if he does, that is likely the catalyst that launches a massive and sustained rise in Indian gold demand.  That demand will be enough to drive gold in an Elliott C wave advance to at least $1650, and probably $2000!
21. If “Royal Goyal” has charge of India’s finance ministry at the same time as Powell is joined by the ECB and then Japan in a giant effort to roll the QE money balls into the fractional reserve banking system, gold will likely surge to $3000 – $5000 very quickly.
22. When gold began its “eight-bagger” advance from the $250 area in 1999, few people anticipated the upside potential.  The highest price targets coming from mainstream analysts were in the $400 area.  Most of them thought gold was going to stay in the doldrums for decades, while the stock market would never decline in a material way.  They had no clue what was coming!
23. Please click here now. Double-click to enlarge. I believe the potential for another eight-bagger is much stronger now than it was in 1998.  This quarterly bar chart shows gold making an epic bull wedge breakout.
24. All that’s technically in play right now is a pullback from the breakout zone and that’s very healthy.  Note the rise in volume from 1998-2002. That came ahead of the runaway action in the price.  The exact same thing is happening now.  Gold and silver investors should have absolute confidence in their holdings… and look to eagerly accumulate more!

Thanks and Cheers,

Stewart Thomson

Graceland Updates

https://gracelandjuniors.com

Email:

stewart@gracelandupdates.com

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:

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