When gold was trading at $1,130 per ounce in July of 2015, an infamous blog post over at the WSJ appeared that equated gold to a pet rock. Gold fell an additional $80 over the following five months, but Yellen came to the rescue a mere five months later in December 2015 and launched the Fed’s first .25% interest rate piker since the great financial crisis. Gold has risen with higher lows and highs ever since. However, one jab at gold was not enough for the author, because he did it again…
Gold: It’s Still a Pet Rock – Jason Zweig at WSJ, July 2016
In retrospect, both were full of assumptions and exhibited an incredible paucity of analysis, and both now fall into the dark corners of a new meme, namely fake news. The pet rock meme will die a horrible death, along with the Keynesian dreams that multiplied paper and digital bytes can replace gold as money. It’s not going to happen, no matter how one tries to slice and dice an argument to fit it into their particular palette of the day in our lifetimes.
Here is a quote regarding cryptocurrencies vs. gold coins from Eric Pomboy at Meridian Macro…
In the meantime, an interesting monetary debate is brewing in the minds of Keynesian monetary policy wonks and the Austrian school of economic thought. With the successful launch of the Chinese oil bourse on March 26, 2018 where oil contracts are now denominated in yuan instead of the USD and are gold-convertible, China single-handedly fired a major shot across the bow of the petrodollar reserve currency hegemony. China is also preparing to pay for all of its imported oil with yuan.
China oil futures launch may threaten primacy of U.S. dollar: UBS – Reuters, Mar. 26
Exclusive: China taking first steps to pay for oil in Yuan this year – sources – Reuters, Mar. 29
The official mouthpiece of China chimed in, too…
Petroyuan to propel currency internationalization… “One clear objective for China’s regulators is to seek ways to internationalize its currency to boost its own economic prominence and reduce its longstanding reliance on the dollar. As the world’s largest crude oil importer, China would naturally benefit from using its own currency over that of an economic rival and strategic competitor. At the same time, China’s Silk Road initiative, which seeks to create trade networks across the Eurasian continent, the Middle East and Africa will almost certainly invigorate the Yuan’s march toward wider usage and the currency’s globalization. However, the dollar will not cede its present dominance in oil markets any time soon. Instead, China is likely to build confidence in the Yuan gradually, through steady measures of reform and opening-up, more robust economic growth, proactive foreign engagement and liberalization of its monetary policy.” – China Global Times, Mar. 29
The Business News Network of Canada had Jaime Carrasco from Canaccord Genuity provide some Q&A on the markets, and opened his visit with five minutes on petroyuan implications for the USD and the gold price going forward. The first five are worth your time.
“Whenever we get into a historical situation where governments take on debt that can never be paid back, the only way history has resolved the issue was to change the currency reserve. By signaling they are buying energy (oil) convertible to gold, has ultimately remonetized money. They feel that since the Silk Road is their backyard, why use the USD. Since 2008 we estimate that about 20,000 tons of gold transferred over to China.” – BNN MarketCall, Apr. 3
China’s Secret Gold Supplier Is Singapore… Estimated Total Chinese Gold Reserves – Koos Jansen via Bullionstar, Apr. 5
Coincidentally or not, on March 22 of this year, four days before China launched their oil bourse, U.S. House Representative for West Virginia Alex Mooney (one “O” away from money), tabled Bill H.R.5404 “to define the dollar as a fixed weight of gold.” Whether this bill evolves into a form that is palatable for the congress critters and senate snakes to actually pass and make law is yet to be determined. Keep in mind, though, that over the last few years, at least 30 states have introduced or passed a bill to end all taxation of gold and silver.
For the record, forget about the dragon for a moment and consider China’s best friend, Russia the bear.
Russia only requires the price of gold to reach $2,400, and they would have a fully backed Monetary Base. – Santiago Capital, Mar. 20
In the meantime, keep in mind that global real interest rates remain in NIRP territory, which is bullish for gold. The following chart data is courtesy of Santiago Capital via the OECD, as of Feb. 28, 2018.
Global central banks can adopt negative rates as a conventional tool: Peoples Bank of China (PBOC) working paper – Reuters, Apr. 3
There are still doves hanging and fluttering about at the Fed, despite what the MSM dishes out. I am sticking with my Taper Caper theory.
Fed’s Bullard sees no reason to hike interest rates further… “The U.S. central bank doesn’t have to raise interest rates further, as monetary policy is close to ‘neutral,’ said St. Louis Fed President James Bullard, on Wednesday. ‘It is not necessary in this circumstance to raise the policy rate further in order to put downward pressure on inflation, since inflation is already below target,’ Bullard said in a speech to a meeting of the Arkansas Bankers Association meeting in Little Rock, AK.” – MarketWatch, Apr. 4
The Trump Administration may be exhibiting a “come to Jesus” moment. Prudence sure beats the twit bravado.
“We May Take A Hit”: Trump Warns Investors To Prepare For “Pain” In The Market… “Speaking on WABC Radio’s ‘Bernie & Sid in the Morning’ program, Trump said ‘I’m not saying there won’t be a little pain so we might lose a little of it but we’re going to have a much stronger country when we’re finished, and that’s what I’m all about.’ ‘We have to do things that other people wouldn’t do. So we may take a hit, but you know what, ultimately we are going to be much stronger for it,’ Trump said during the radio interview on Friday. ‘It’s something we had to do, and ultimately if you take a look it’s not only trade with China – it’s everybody.’ – ZeroHedge, Apr. 6
So you thought I would leave silver out of the picture again this week? Yes, I am. Silver is not going anywhere spectacular, no matter what JPM does or the Commitment of Traders reports say, until gold destroys the overhead resistance Fibonacci line at $1,380. Here are the current numbers on JPM’s silver hoard.
“JPMorgan books in ANOTHER 605,000 ounces of silver into their Comex vault today…giving them a new record high of 141,530,605 ounces and control of 53.7% of the silver in the Comex vaults.” – TFMetals Report, Apr. 6
Some final thoughts about gold to peruse before I do this week’s chart technical analysis.
Gold price to EXPLODE: Reserves dwindle and US-China trade war talk spark panic… “GOLD bullion prices could soon spike in price with leading members of the global mining industry warning that reserves are not being replaced.” – ExpressUK, – Apr. 5
A Breakout Here Could Produce Another Gold Rush… “Gold prices have chopped higher since bottoming in December 2015. The move has not been as exciting as precious metals bulls would like but it’s followed a trend of higher lows nonetheless.” – ZeroHedge, Apr. 5
March 2018 The Gold Chronicles with Jim Rickards and Alex Stanczyk – Update on 3rd Great Gold Bull Market – Proper portfolio allocation when it comes to gold – The difference in mindset between investors that are trying to accumulate wealth vs. investors who have wealth and are trying to protect it – Gold as insurance versus investment -Currency Wars – Trade Wars – Moving jobs from outside the US, into the US – North Korea Update – Physical Gold Fund, Mar. 29
On to the gold and USD charts. As always, to view a larger version of any chart, right-click on it and choose your “view image” option.
Here is the recent Commitments of Traders (COT) report as of the Apr. 3, 2018 data dump via Goldseek, then the COT overlaid with the gold spot weekly chart as of the Apr. 6 close. The visual is telegraphing that an exit out of the chop with a shift in price direction is about to occur.
Gold weekly chart as of Apr. 6, 2018 close…
There’s nothing much to report, as gold remains in a tight consolidation in the Flagpole & Flag since Jan. 25. That is positive. There is one additional pattern forming that I will discuss below on the daily chart. The bullish Inverse Head & Shoulders Neckline drawn back from 2013 sits just below a Fibonacci level of $1,380. The right shoulder has formed one or two Cup & Handle patterns, and either one works. The bullish Golden Cross that took place during Sep./Oct. 2017 is moving along nicely. All moving averages remain below the current price action. The price has found support along the 21 Exponential Moving Average (EMA) and 300 Simple Moving Average (SMA). The DMI-ADX remains positive but indecisive as the price chops. The StochRSI rolled over to the negative side but is showing a potential pivot. The issue with a Volume feed at Netdania is resolved, so the current chart is showing an accurate representation. The seasonal pattern of an upward price move should play out through to mid-May. I remain Bullish long-term and Neutral near-term. I still see a $1,380 breakout as imminent.
Gold daily chart as of Apr. 6, 2018 close…
The pattern of focus is still the Flagpole & Flag. It is a tight, positive pattern. A potential Inverse Head & Shoulders is forming in the flag, with the topside trendline as its Neckline. Candlestick tails have been riding along the 100 EMA since early February, and only one close below it took place on Mar. 20. The Golden Cross in April 2017 remains in play. The spreads between moving averages remain consistent and are not rolling over. The 300 and 500 SMA are back in numeral order. The DMI-ADX remains indecisive but has stuck on the positive side since Mar. 21. The StochRSI is now flat after having bottomed out and then spiked last month. Volumes had an unusual collapse on the previous analysis, but Netdania resolved a feed issue and they now show an accurate representation. All eyes remain on the $1,380 Neckline and $1,375 Cup & Handle Rimlines (see weekly chart). I remain Bullish long-term and Neutral near-term.
USD weekly chart as of Apr. 6, 2018 close… Bearish. The Death Cross threat.
Trade war or not, weak dollar trades here to stay – Reuters poll, Apr. 5
Dollar falters on U.S.-China trade rift, weaker-than-forecast jobs data – Reuters, Apr. 5
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