Gold: 1323.40, +5.50.
Gold rebounded some of the losses on the week that saw it break lower through the 50 day MA to start.
Closing in on the bottom of its 4 month range.
Source: Investment House
Until recently, the New York Fed had about 6,000 tons of gold stored in its vaults on Liberty Street in Lower Manhattan. Contrary to popular belief, the gold stored there does not belong to the United States (the U.S. gold is stored in Fort Knox and West Point).
The Fed gold belongs to countries around the world and the International Monetary Fund.
Beginning a few years ago, central banks demanded the return of their gold to their home countries. Germany was the most prominent example, but there were others, including smaller holders such as Azerbaijan.
The process is difficult because the Fed bullion consists of old bars, some stacked up since the 1920s, that don’t meet today’s standard for purity and size. This doesn’t mean the gold is bad, just that the bars have to be melted down and re-refined to meet the new standards.
Now, one of the largest holders, Turkey, is reclaiming its gold also. Turkey has had 220 tons stored in the U.S.
When all the pieces line up for an asset and it still can’t push higher, we can say it’s “acting poorly.” It’s not a good sign.
On top of that, global tensions are easing (at least a little). Corporate earnings have been fantastic. And the U.S. dollar has started to strengthen.
These are no longer “game on, buy everything” conditions. So if you think you might be too bullish on gold and gold stocks, you probably are…
You may want to reduce your exposure to the sector. Or at the very least, you may want to tighten your stop losses.
For intermediate- and short-term trading, the conditions are neutral, at best.
Until the price action turns bullish… Until gold breaks above its 2016 highs 0f US$1366… You don’t want to get aggressive with gold stocks.
And you should be prepared for lower prices.
1. Gold mining stocks look inexpensive
2. Rising inflation has historically lifted gold prices
3. Gold supply is shrinking while demand continues to grow
4. Gold prices have historically tracked government debt—which appears to be increasing dramatically.
Pillar One: Oil prices are rising
Pillar Two: Interest rates are rising
Pillar Three: The petro-yuan
Pillar Four: Currency wars
Pillar Five: Tariffs, sanctions, and potential trade wars
Pillar Six: War
Pillar Seven: Peak gold
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