Gold: Global Economic Risk Is On Red Alert Due To Pandemic

Oct. 29, 2020 6:22 PM ETGLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, UBG, QGLDX, PHYS:CA8 Comments

Summary

  • There's uncertainty about the US presidential election next week, doubts about any possible US stimulus package, tensions with China, and increasing COVID-19 cases with unemployment rates high and businesses closing.
  • Gold and silver are bullish in the mid to long term.
  • Europe is locking down again, which will further harm their economies.
  • Whoever wins the US election next week is going to face the economic necessity of a larger stimulus package, which will further pump up stocks, while also being bullish for gold and silver as fears of inflation will increase.
  • Looking for a portfolio of ideas like this one? Members of Mean Reversion Trading get exclusive access to our model portfolio. Get started today »

Fundamentals

The fundamentals for gold and silver remain strong, even as both have high volatility, which is great for day traders. With uncertainty about the US presidential election next week, doubts about any possible US stimulus package, tensions with China, and increasing COVID-19 cases with unemployment rates high and businesses closing, gold and silver are bullish in the mid to long term. Europe is locking down again, which will further harm their economies. In the short term we will get some reversals in gold, which you can use to build a larger long-term position. With increasing government debt, fiat currencies will continue to decline in value, which also is bullish for gold and silver. Whoever wins the US election next week is going to face the economic necessity of a larger stimulus package, which will further pump up stocks, while also being bullish for gold and silver as fears of inflation will increase. As we move into a new economic system, gold will play a major role as a stabilizing currency, especially as inflation and hyperinflation fears increase with the massive printing of money and increasing debt.

Creating more supply of any asset, such as a currency, decreases its value. Therefore, governments printing money will reduce its purchasing power and increase the rate of inflation. At least up to this point, governments do not appear to be concerned with the inflationary effects of their money printing. Since they are not, it appears likely that inflation or even hyperinflation is on the horizon. They may at some point introduce a digital currency or another currency as the global reserve currency, but no one knows at this point. The system is broken and is unsustainable, so change will happen. With such massive debt, any increase in interest rates will lead to extensive defaults around the world. For all of these reasons, we are buying gold and silver for the long term. It's a great opportunity.

When gold came down today to $1,859, the media started to say that the boom in gold was over. If you listened to the media, you would have sold. Yet, supply came into the market and gold reversed back above $1,872. The Variable Changing Price Momentum Indicator (VC PMI) said that the market was likely to reverse, and it did.

Gold

Gold is at $1,872. Gold is down $6. We have come back from the lows today. The daily mean level we are looking at based on the VC PMI is at $1886. The daily Buy 1 level is $1,860, which has been activated. We are now getting another active signal to buy at $1,874. The target above is $1,886, which is the weekly target. Trading above $1,869 is activating the weekly Buy 2 signal with the same $1,886 target. You can use $1,869 as a stop level. Do not use straight stops, since they can be taken out. We do use straight stops to trail a position, but other than that, we do not use straight stops. If you have multiple contracts, you also can get out with profits at various levels to protect your profits. We are at the bottom of the trading range and, once we break out of that range, the target will be above $1,900, and possibly up to $1,988.

Courtesy: TickerTocker

The Buy 1 level provides a 90 percent probability of the market reverting from that level back to the mean, while the Buy 2 level has a 95 percent probability of a reversion to the mean. The same applies for daily, weekly and monthly signals, as well as for the Sell 1 and Sell 2 levels back down to the mean.

Gold is giving us a long signal daily and weekly with the target of $1,886. The corrections we have been getting have all been short lived. Serious money is coming into the gold market from hedge funds and institutional investors. With interest rates almost at zero, there's very little room to earn any income on a bond portfolio.

Silver

Silver has had a major reversion back down to the daily Buy 1 level at $22.8250 this morning. The daily target is $23.72. The Buy 2 weekly level is $23.57, which will activate a weekly trigger buy signal. The Buy 1 weekly target is $24.14. The reversion appears to be confirming that the metals cannot be kept down.

To learn more about how the VC PMI works and receive weekly reports on the E-mini, gold and silver, check out our Marketplace service, Mean Reversion Trading.

This article was written by

Weekly AI gold, silver and E-Mini S&P reports with 90%-95% probabilities.

The Equity Management Academy (EMA2trade.com) was founded based on a belief in the power of education to change lives. After thirty years of trading in markets from New York to Chicago, CEO Patrick MontesDeOca founded the Academy to pass on all he had learned about the financial markets to help traders from neophytes to veterans become more effective at transforming knowledge into wealth. His knowledge is embodied in the fully automated proprietary trading program: the Variable Changing Price Momentum Indicator (VC PMI). The Academy also assists institutional traders and hedgers.

As a member of the Academy, you can watch our analysts and traders place trades in real time on clear, succinct recommendations based on our proprietary algorithm, the VC PMI. EMA’s advanced trading courses also provide you with hours of instructional streaming video taught by our Chief Technical Analyst. Our videos teach you the skills to identify trading opportunities in the financial markets while learning to manage risk and growing your portfolio through the application of automated trading intelligence.

Experienced traders, hedgers and institutional traders can subscribe to marketing reports based on the VC PMI, which provides clear, precise entry and exit points to trade a full range of markets.

Seeking Alpha reports are based on the VC PMI analysis of various markets and written by Scot Macdonald, PhD, who is the Director of Research for the Equity Management Academy. He has a doctorate from the University of Southern California with a focus on international political economy. He was a broker and analyst at the largest independent brokerage firm in the western United States for five years. He has researched, written and edited financial articles for more than a decade. He is the author of nine books, including research on decision making and the use of lessons from the past to make current decisions. For information on his books, please visit www.KerreraHousePress.com.

Disclosure: I am/we are long GDX. 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.

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