$1,400 Gold Coming Up

|
Includes: GLD, GLD-USD, GLDLF
by: Scot Macdonald
Summary

On Friday, President Trump attacked Syria with the support of France and Britain, which some critics say violated various United Nations’ agreements.

We have a series of potential black swans that lead me to question the timing of the US administration’s policies now being implemented.

I believe there is going to be an explosive move in the price of metals that could surpass recent moves and challenge four-and five-year highs.

Fundamentals: Syria, Real War, and Trade Wars

As we analyze the fundamental chatter from last week, the rumors of going to war have overtaken the rumors of trade war. On Friday, President Trump decided to attack Syria with the support of France and Britain, which according to some critics violated various United Nations’ agreements. This was a one-time attack that appears to have been completed. The rumor about bombing Syria has become a fact and in most cases, the markets tend to then do the reverse. I believe that the rally that we have seen in the gold market has been in anticipation of going to war with Syria, as well as the uncertainty based on recent trade-war rhetoric that is filling the news. We have a series of potential black swans that lead me to question the timing of the US administration’s policies now being implemented. If you look at the economy, especially the retail sector, with record numbers of stores closing, and higher interest rates threatening corporations, along with a widening trade deficit due to Trump administration policies, including tax reform, and a ballooning debt to GDP ratio, which mathematically is unsustainable, it all leads me to be cautious that the gold market might be anticipating something greater than what we just witnessed this past weekend in Syria.


Gold Supply and Demand Levels

Let’s look at the VC PMI supply and demand levels we have identified for this coming week and how we can take advantage of the volatility of the gold market, which appears to be increasing, and what I believe is going to be an explosive move in the price of metals that could surpass recent moves and challenge four-and five-year highs.

I will update you on this analysis in detail over the next couple of weeks as we compile the data to support the conclusion that the gold market may be in a position to complete the acceleration phase of the 9-year cycle that has been suppressing the prices of gold and silver for the past four or five years. Some of the early indications suggest that we could potentially accomplish a price range that is record-breaking, reaching new highs in the last 10% of the 9-year cycle. Such a move puts into place in 2018 the possibility that within the next few months a record-breaking acceleration could develop. But in the meantime, we want to look at the supply and demand levels that the market is giving us and see how the price relates to these levels to give us an indication of the highest probability points to position ourselves for these potentially historic moves.

As we look at the report that we published on Seeking Alpha on April 13, 2018, with the market on Friday closing at $1348, in using the first filter, the 9-day moving average, at $1338, we are coming into this week with a bullish trend momentum or sentiment. The algorithm also tells us that if the market closes below $1338, it would negate this bullish trend momentum to neutral. This is the first level of protection the VC PMI identifies for self-directed traders.

The second filter is the weekly price momentum indicator, which is the average or mean price, or pivot point for next week. By identifying this level of $1350, with the market closing below it, it indicates that we are entering a bearish price momentum phase. It also tells us that if we close above the mean or average of $1350, this bearish price momentum would go neutral. A second close above $1350 would activate the sell 1 and sell 2 levels above the mean, and the VC PMI recommends taking profits on any longs into these levels, and to reverse and go short if accomplished and put your stop at $1384. If the market comes down to test that $1332 level, it would activate a buy signal on the second close above $1332. Automatically your stop is identified at $1317. In the meantime, because the market closed below the mean of $1350, it recommends taking profits at the buy 1 level of $1332 and the buy 2 level of $1317, which are also the relative implied volatility levels that give you a 90% to 95% probability that the price will probably revert back to the mean of $1350.

Conclusion

It seems that the volatility factor in gold is increasing, especially with recent developments in Syria. As we come into next week, we are ready to take profits at the sell 1 and sell 2 levels of $1366 and $1384, and go neutral. Then, wait for the market to tell us what to do using the VC PMI automated algorithm. The VC PMI offers similarly precise forecasts for more than a dozen other markets for self-directed traders.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts. It is for educational purposes only.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.