GOLD FUNDAMENTALS LOOK STRONG / SEEKING ALPHA

Gold Fundamentals Look Strong

Equity Management Academy

Summary

- With governments printing money non-stop, gold is sure to rise in value.

- The IMF is developing a new model to deal with the current crisis and build prosperity for more people in the future.

- Gold's intense volatility is perfect for making profits day trading using a rigorous system.

- The fundamentals and the technicals point to $1,900 gold.

We are in the midst of a transformation into a new economic system. The International Monetary Fund is discussing how to restructure the global economy for the benefit of mankind. 

The old system is dying. A new one will be created. In order for the world’s economies to come out of the pandemic, they are going to have to increase their debt ratios far more than previously thought. 

The UK said its debt ratio is about 125% compared to GDP. The IMF is suggesting that Western economies increase their debt-to-GDP ratio to 125%. 

The US is already beyond that level. Therefore, they are going to create even more debt. They continue to follow the Keynesian model.

Until 1971, the US dollar was backed by gold. Once the US went off the gold standard, the dollar started to collapse in terms of intrinsic value and purchasing power. 

The amount of money that has been printed over the years means that the dollar has lost 98% of its purchasing power since 1971 and that decline is now nearing an end point, making the dollar and other fiat currencies worth almost nothing.

The IMF is trying to help developing countries, which are suffering in large part due to the policies that the IMF has followed for years. Venezuela, for example, has so much printed money that inflation is starting to accelerate. 

You need to prepare for such inflation around the world, including in the United States. 

Fiat currencies will be worth nothing. 

Gold is a solid alternative to protect your wealth.

Millions of Americans are homeless and/or unemployed. The homeless population around the world is exploding. The lower middle class is homeless. Governments are debating how much money is needed, while Main Street and the people suffer. 

2008 marked the start of when all the corruption of the system started to be revealed in terms of inaccurate bond ratings, massive debt to individuals who could never afford to pay it back, and investments based on borrowed money. 

Inflation is already running at about 10%, if you use the old system of measuring inflation. Today, food and energy are left out.

Whoever wins the election in November, they will face the same problem and will in all likelihood continue to print money to shore up the system for as long as possible. They will continue to print money, which will devalue fiat currencies to the point of extinction. 

By devaluing currency, they decrease the value of the debt in the fiat currencies. Therefore, they keep interest rates at almost zero so that big banks and investors can borrow as much money as they want.

We expect extreme volatility in the markets over the next few months. Gold is moving $30 or $40 a day, which for a trader is a dream come true. You can make a great deal of money in such markets, but only if you know your risk and how to trade without emotion, such as with the Variable Changing Price Momentum Indicator (VC PMI). 

Only a small percentage of investors are involved in the gold market and even fewer in the silver market. Once more people realize the importance of gold and silver for the future, prices will rise to levels never seen before. 

We are down $200 from the highs of $2,088 a few months ago. We are at $1,888 or so, so we can see a major move up is on the horizon.

Why is gold down if all the fundamentals are so bullish? Talk about a stimulus package may be affecting the market. The fundamentals often lag the market, and the fundamentals are often contradictory. 

Whatever the cause of gold declining, if you focus on the technicals and what the market is telling us, then you can ignore the fundamentals and trade profitably.

Technicals

Gold is in a fast market. It is trading last at $1,901.20. We have a bit of a selloff and the Variable Changing Price Momentum Indicator (VC PMI) has activated the daily Buy 2 level at $1,901. This is a trend alert. The first time the price touches that level, it is an alert. It tells you to be ready if the market closes above that number using the 15-minute bar, then a buy trigger will be activated.

The market came down from $1,936. The weekly VC PMI codes told us that we wanted to sell when the market reached $1,933. The market rose and found the supply that the VC PMI predicted would be up at that level, before it came down to the weekly mean of $1,909. Now it is activating the daily VC PMI buy signal. This is the conservative approach; waiting for the market to touch that number and then close above that number before you enter the market. 

If you want to be aggressive, you can buy now at the market to go long at $1,904. $1,901 is the Buy 2 level, so you can use that level as your protective stop. You can also use a maximum dollar stop based on your size and profile. You can also carry the position to the end of the day, which would be an aggressive play for day traders.

Closing above $1,904 is a bullish signal. At this level, buyers will begin to get into the market and the market is likely to run back up to the average price. If we close below $1,901, then $1,879 and $1,869 become targets, which are the VC PMI levels below. This area is a very high probability (90% or 95%) buy area. 

Trading below $1,900 is now the extreme level below that market on the daily, weekly and monthly VC PMI levels. If supply keeps coming in, we may go down to $1,879. We are in a monthly bearish price momentum from $1,914.

We are looking to add positions at these levels. We have covered our short hedge and are now focused on buying GDX and NUGT. We are entering an area where there is a high likelihood of buyers coming into the market and prices going back up.