We think there is a big positive breakout coming for gold (NYSEARCA:GLD). We think the Fed is on hold which allows inflation worries to build. We think all-world is moving closer to third-world numbers as EVERYBODY is calling for a global slowdown. We think Gold wins for many reasons.
First, we want to look at a gold chart to see the upcoming breakout potential. Gold is coming up to a major resistance but we expect it to slice through on the upside.
Here you see a GLD ETF chart dating back seven years. You see that the price we've reached has acted as a key cross over point to decide future direction.
On the GLD ETF the price is 131.
Global Slowdown Everywhere
We think as the global economic slowdown gets worse citizens and countries will build up gold as a safe-haven.
We just heard from a Fed Board member Jerome Powell that there is downside risk to global growth.
We heard the UK drop their growth target by 150bp for 2017 based on Brexit.
We heard the head of the ECB say, "There is downside risk to the .5% 3 year Brexit impact."
Japan is chasing any game in town to hold up their economy.
China GDP held up on the last read but has been slowing. This is a major risk to global growth because of China's contribution to that global growth number.
Here's China GDP slowing.
China GDP is in a downtrend. That is material risk to the global GDP number. For one China GDP is a huge part of the globe's GDP. Second their growth rate is among the leaders. This falling off places the world at risk.
As global economies slow and go negative, we think gold will be more in demand as a safe-haven.
Inflation Out Of The Cage
We think that the US economy is doing ok, not great. Even if the US shows any pickup in growth they will likely leave Fed Funds rates the same.
As the Fed leaves rates the same, inflation can seep out.
Since we think the Fed is stuck, any good US growth numbers will lift inflation expectations and therefore lift gold.
Countries' Steady Diet Of Gold
China has been on a steady diet of gold purchases ever since a large purchase June 2015.(Gold Data)
Russia has also been on a steady gold diet.
Here are their very steady monthly purchases.
Here is cumulative global country purchases since 2008.
This chart shows cumulative gold purchases by countries going back to January 2008.
We think countries understand the value in gold. Holding gold can protect a country's currency value whenever that moment happens where inflation spikes and currencies tumble.
We think that the record amounts of global easing is causing a risk event to currency values tumbling. Easing means huge quantities of money supplied with no demand. High supply and low demand leads to lower prices. We think as currency values drop you'll find that in higher goods prices. Lower currency buys less which means inflation.
Some countries are planning ahead of inflation by buying gold.
We expect gold to break out past a key resistance level. We think the catalysts have not changed. We see the current break out as part of its continued uptrend. Such a breakout however could get attention and more buyers. There are several fundamental drivers to gold. We see countries purchasing gold globally, huge increases of the global money supply and inflation risks as key drivers for gold's ascent.
Letting The Market Dictate
To enter a trade we have to let the market dictate. Whatever we think in the above report we need a gameplan to enter when the market is in our favor. To line up timing on a shorter term basis with risk management spelled out try Your Trading Team an Elazar Advisors, LLC service on Seeking Alpha.
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