Gold Stocks: Stand & Salute The Flag

1. The gold-rates narrative may be reaching a frenzied crescendo. For some insight into what could happen after Wednesday’s announcement, please click here now. Click to enlarge. Silly stock market pundits always want the market to keep going up, but they could be correct about a hike on Wednesday being coupled with a rally for stocks.
2. What about gold?
3. Well, please click here now. In December 2015, as Fed boss Janet prepared to hike…
4. I urged gold bugs to prepare for gold to skyrocket after the hike, and it did!
5. The current situation is a bit different, and not in a good way; debt has skyrocketed, and Fed boss Kevin is looking to use QT to shrink the central bank’s horrific balance sheet.
6. In a nutshell, there could be a relief rally for gold against fiat, but a “final” low could remain elusive for some time.
7. Please click here now. Click to enlarge. The bears are clearly in short-term control. Oil and gold have diverged, and there’s a big H&S top on the chart. Even if there is a relief rally, it could be followed by a drop to $3950.
8. Tactics? Please click here now. Click to enlarge this daily chart. Summer doldrums made the $4200-$4941 congestion zone one to buy.
9. Gamblers can focus on $4200 and investors on $3941.
10. How high can rates go before the “sell gold because rates are rising” becomes “buy gold if rates rise”?
11. Well, the US government debt will likely be $50 trillion by the time a major inflation-oriented surge in rates occurs.
12. At 7%, the government’s annual financing cost would be $3.5 trillion, and it would be lucky to get $ 5 trillion a year in taxes and fees.
13. In a nutshell, a 7% interest rate likely sees the government’s interest on its debt rise to 70% of its revenues.
14. That could create a mass panic out of bonds… and into gold.
15. The higher rates go, the closer they get to a “Death to the US government” threshold.
16. Currently, it’s just gold bugs and a few savvy mainstream pundits (Ray Dalio, for example) who understand the need not just to own gold…but to own it as rates rise.
17. That will change as rates rise further. Complacent money managers who are currently eagerly discussing how negative a quarter-point rate hike is for gold will suddenly find themselves wondering why they trusted the government and fiat at all, and they’ll become focused on getting more and more gold.
18.  A daily focus on the big picture is critical for investors as inflation, tariffs, war, a wildly overvalued stock market, government debt horror, and empire transition dominate the investing landscape.
19. For a look at the weekly gold chart, please click here now. Click to enlarge. The more worried an investor becomes about “how low” gold can go with rate hikes ($3941 or even $3500 for example), the more likely to be overallocated to the market (especially miners) relative to their real-world intestinal fortitude.
20. Instead of trying to call some “final low” or “new bear market”, my suggestion is to simply focus on buy zones of significance.
21. It’s important to stress-test portfolio allocation for the gold price going to various buy and sell zones ahead of time rather than only after gold has arrived there.
22. When it comes to gold, silver, and miners, if an investor becomes overly greedy on a rally or overly fearful on a price sale…nothing good happens from there.
23.  Please click here now. Click to enlarge this stunning GDX chart. The bull flag looks surreal… but it’s real.
24. A pullback to about $85 makes it even more real, and the flag target is about $170. The breakout could happen after the Fed meeting, or at a later point in time. For gold bugs who are eager to spend a lot more time in the higher-priced sun, I’ll ask them to stand… and salute this flag!

Thanks!

Cheers

St