My Quick Rant, Just As An Introduction!
With valuations in gold stocks at the lowest prices in the history of man (especially when compared to the price of gold), and with sentiment so negative, and bearishness and short positioning so pervasive, the rubber band has been stretched to the limit. It is only a matter of time before the rubber band snaps, and gold springs back strongly to the upside! What could be the catalyst for a snapping of the rubber band? Well, how about a rate increase by the Fed next week? The bigger the hike, the better!
How many months have they trumpeted the beginning of the end of the world, (the steady drum beat of the Fed's raising of interest rates)?! But how many times can you kick gold to the curb before you finally get all the bad news priced in? If we do get a rate hike next week, do not be surprised by a quick $25 selloff, to be almost immediately followed by the mother of all shortcovering rallies of $50, $75, or even $100, by Wednesday's close or definitely by Friday of next week.
Everyone knows that it is surely "one and done" so if the Fed shoots their one bullet (raises rates), instead of just talking us to death, yes, if they should discharge their one solitary bullet, they will be out of ammunition and the only weapon left in their arsenal, is quantitative easing (which they will likely be forced to implement before the end of the year)!
Seriously, I Do Remain Constructive On Gold Going Into The Fed Meeting Next Week
Gary Wagner just did a video at kitco.com, click here, where he mentions why he is constructive on gold as we hold above $1100. I believe that we should hold that support at least until next Wednesday's Fed Announcement. I am not going to post a chart but suffice it to say gold fell for 5 straight down days, and broke down to the major $1100 support level on Wednesday. This was followed by Thursday's small correction higher. Today, Friday, September 11, 2015, we could have some weakness early, but should reverse higher into the close. But even if we close down Friday, I want to be buying any and all weakness today in both gold futures and in the washed out gold stocks like IAG and KGC. With the heavily bearish tone and significant short positions in the market, Monday and Tuesday of next week will likely result in higher closes due to shortcovering by bears who don't want to stay in through the rate decision. If we can get back above $1121 on Monday, December Gold futures could rally on towards the $1130 to $1150 area by Wednesday morning.
I am hopeful that we are trading above the $1130 level in December Gold futures when the Fed announcement comes out next Wednesday afternoon, so that a $30 plunge keeps us above the $1100 level, or a running of stops (the most bullish scenario of all) would get us to $1095 where we could then launch a significant rally above $1150 as early as Wednesday's close.
Put me on the record that no matter how much gold falls next week on Wednesday, post Fed announcement, that gold should rally twice as much higher over the next 3 to 5 trading days. Hey, if crude oil can pop 27% in 3 days, why can't gold pop 5 to 10% over the next 3 to 5 days following the Fed decision. In my book, a "no decision" by the Fed, should result in a small gold rally. But an actual rate hike (the bigger the better) we get an ultimate move higher, especially if the initial move is sharply lowerl
Of course I can be totally wrong. It would not be the first time. I just want to go on record to say that any and all negative news should already be priced into both gold and the gold mining shares, and the next big move in gold should be to the upside......that is if there is any justice in the world.
I do not follow the party line. I am one lone voice not afraid to go against the crowd and be just a little (or a lot) constructive towards gold. I remain a "Contrarian Extraodinaire". The last time I did one of these rant articles, it was about the US Dollar rallying to the moon and beyond, for infinity! The US Dollar has never been that high since. Then more recently I ranted in my newsletter how crude oil had entered the theatre of the absurd, and the following week, we saw the beginning of a 27% three day rally. Well, now I am ranting about gold. Is the third time a charm?!
The thoughts and opinions in this article, along with all STOCKTALK posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.