Gold's Next Move

We have been sitting on the sidelines of the gold market for some time now, waiting for the market to show its hand.

We have two potential support areas targeted, one, at $1243 was achieved today.  The other is $1215 based on symmetry moves and other calculations.  When one considers GDX, we are now within 50 cents of the low back in July.  So support should appear soon.  Further the FOMC interest rate decision to raise rates on Wednesday is a foregone conclusion.

In our view, little is now in the way of an increase in both gold metal and stock prices for the near term.  A rate hike in March 2018 is by no means baked into the market cake.  So it is reasonable to anticipate some weeks of strength particularly with strong seasonality in gold in December and January.

A potential black swan flying around is the matter of Bitcoin.  While the cryptocurrency appears to take on a certain safe haven function, it’s parabolic move leaves us confident the quasicurrency will collapse in the relatively near term.  One must realize there is no way to short crypto at the moment, so no way for Central Banks to smack it down  “manage” the currency as they do with gold via the futures market.  With the start of Bitcoin futures trading these last few days we expect that the central planners will not tolerate it’s challenge to the almighty US dollar.  Expect restrictions to come into place either overtly or covertly to bring the price down.  While we have no specific evidence of this hypothesis, one does not need to have much imagination to think that have the reserve currency challenged will be allowed much longer.

Once the Bitcoin threat is quashed by Central Banks, we expect much stronger interest in the gold market to emerge.