Gold: It's Time For The Metal To Shine
Summary
- The unemployment numbers came out and surprised everyone on the Street.
- Now we will see how the Fed is going to manage this situation.
- Talk of tapering has been political rhetoric.
- Looking for a portfolio of ideas like this one? Members of Mean Reversion Trading get exclusive access to our model portfolio. Learn More »
Fundamentals
The unemployment numbers came out and surprised everyone on the Street. The economy is not as strong as many believed. The experts missed it by a mile. The taper talk is off the table. Now we will see how the Fed is going to manage this situation. They may raise interest rates or continue to keep a dovish stand, as they have. Talk of tapering has been political rhetoric. The market is dictating what needs to be done. The metals going up fast are an indication that the real monetary asset - precious metals - are going to come back into vogue.
Cryptocurrencies are also set to rise fast as investors look for an alternative to fiat currencies, which governments continue to print more and more of. Now the government is looking at ways to regulate cryptocurrencies, since they are becoming so popular. The industry is going to undergo a transformation in terms of regulation, but it is not going away. All of the money in cryptocurrencies is going to see that gold and silver are massively undervalued. If Bitcoin did not exist, then gold would be at $50,000. The market created Bitcoin to protect itself against the destruction of fiat currencies, which is happening due to the tremendous amount of money being pumped into the market. Printing more money devalues the currency itself. Even if your asset is up 30%, whether it is real estate, diamonds or whatever, it is because the underlying currency has been devalued. It is a silent factor. Most people just see price inflation, which we are beginning to see, but most of the increase in prices is due to the currency losing value. This is a great time to create wealth for yourself and to protect yourself against what is inevitably coming: a high and persistent level of inflation.
Technicals
Courtesy: ema2trade.com
Silver
Silver is up 68 cents. The Variable Changing Price Momentum Indicator (VC PMI) weekly target is $24.95. We are near the Sell 1 area of $24.51 to the Sell 2 level of $24.95. If you are long and have multiple positions, you can use those levels to take profits. Silver is moving aggressively to the upside. There appears to be a lot of short-covering and new buyers coming into the market. Silver is leading the way right now.
Courtesy: TDAmeritrade
Gold
Gold is at $1833.60, up $21.5 in a volatile environment. We have been recommending to go long as we came down to the VC PMI extreme level recently. We made a low of $1785 on the 27th. This came into a level of support, which was near the VC PMI weekly Buy 2 level of $1763, where we expected buyers to come into the market.
Courtesy: TDAmeritrade
$1826 is the daily Sell 2 level. The market is trading above $1826, so it has neutralized the daily signals. So we have completed the daily signal targets. The daily program then goes neutral and we move to the weekly signals. The VC PMI weekly Sell 1 level is $1836, which is now active. The weekly Sell 2 target is $1851. Once the market traded above $1809 it activated a weekly bullish price momentum. It also activated the targets above (Sell 1 and 2) for the weekly numbers. It activated a bullish price momentum.
We are in a completion pattern and we now focus on the weekly signals. We are waiting to see what kind of demand comes into the market, which could push the market to the weekly target of $1863.
We continue to hold long-term positions in gold and silver, while making day and short-term trades to take advantage of the volatility.
Courtesy: TDAmeritrade
We are looking for gold to begin an acceleration to that $2164 annual target. The monthly average is $1809. The market has been trading in a choppy fashion the past few days around that average price. We do not recommend trading around the average, since there is a 50/50 chance it will go up or down. The Sell 1 level is $1847 and the Sell 2 level is $1878, so keep your eyes on those monthly VC PMI numbers.
The market trading above $1810, which is the annual average price. We are moving into the beginning of our next annual cycle, which begins on September 28. The gains appear to be holding above the Sell 2 level, which is a good sign that the gold market is consolidating at these higher levels.
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
Analyst’s Disclosure: I/we have a beneficial long position in the shares of GDX either through stock ownership, options, or other derivatives. 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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