As I have been saying in my silver articles of late, those that have been following the fundamentals in the metals must feel like they are living in the Bizzaro-world:
So, talks have begun regarding "tapering" at the Fed, China is supposedly in a slowdown, and the metals have been going up. For many viewing these facts, they may think that we are in a Bizzaro world of some kind. But, for those that follow this type of news and think that it actually matters for the direction of the metals, you must be the most confused people in the world.
Now, think about it, first you are expecting that the infusion of new QE-Infinity money will cause the metals to go to the moon, only to see the exact opposite occur, with the metals tanking. Then, you see announcements of the Fed's tapering and China's slow down, followed by the metals rising. You news followers must be the most confused people on the face of the earth at this point in time.
But, it seems that metal bulls are so desperate to find a "reason" for this rally that they have shut down their minds in order to present the latest and greatest reason gold is rallying: People are actually claiming that the metals are reacting to the fact that the Fed is really not going to taper at all. Rather, they will keep QE in place, and that is what is causing this rally in the metals.
This makes me scratch my head in absolute amazement and disbelief. Let me see if I really understand this argument. First, QE-Infinity was announced, and, as I prognosticated, gold entered into a sizeable decline - even larger than I had initially expected. So, it clearly did not rally on QE. But, now the argument is that the Fed will really not take away QE, and supposedly that is what is making the metals rally? Excuse me, but HUH?
I am seriously hoping those of you that actually use their minds can see through this ridiculous line of "reasoning." QE does not cause the metals to rally, but not taking it away will? Maybe if I had that lobotomy, this would make sense to me. But, thank G-d my mind is still functioning quite well, and I can see how desperate people have gotten in their desire to see the metals rally. Or, I can simply reiterate that it is not a "reason" that makes metals rally, but, as I have been saying for years, it is sentiment which moves metals.
So, where is sentiment taking us at this time? Well, based upon my analysis, as long as GLD maintains over 127, then I am expecting we move towards the 134.50-136.25 region next. And, as long as we maintain support over the 131 region during the pullback/consolidation after the 134.50-136.25 region is hit, my expectation would be that we will approach the 142 region.
So, over the next several weeks, I will be watching how GLD reacts on its way up, as my larger target seems to be that 142 region, which has multiple calculations pointing toward it being hit. But, that could very well be the local top for this rally, which will then set up a final drop in GLD, with a minimum target of the 112 region in the fall.
And, as I said with silver, I will maintain an open mind that the low in the metals "may" be in place, but there is a lot the metals will have to prove to me to convince me of this perspective. Stay tuned.
Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.