Gold: Déjà Vu 2020 All Over Again?
Summary
- The upsides for gold and silver are not over.
- New technology is allowing the little guy to make a dent in the hedge funds' positions.
- Gold and silver have tremendous shortages.
- You can't get physical supply without paying a big premium.
Fundamentals
The upsides for gold and silver are not over.
The past few weeks, a new energy has entered the market.
New technology is allowing the little guy to make a dent in the hedge funds' positions.
Gold and silver have tremendous shortages.
You can't get physical supply without paying a big premium.
The physical price is not reflected yet in the paper markets, because the hedge funds and central banks are using the paper markets to sell short up to 10 times more supply annually than is available.
Thereby, they have been depressing the price of gold and silver by manipulating the price in the paper market by creating artificial supply that does not exist.
You can't manipulate the physical market as much as the paper markets.
Traditionally the physical market price has been set based on the futures market price, but that level has been set at a price that suits the short sellers.
The Reddit crowd discovered that GameStop was 130% short, they wondered how you could sell more than 100% of the stock short, unless you want to manipulate the price.
A similar thing was happening in gold and silver.
Across several markets, central banks and hedge funds have eliminated price discovery by manipulating the price of stocks and precious metals.
Gold's price does not reflect the fundamentals, which continue to worsen.
The economy still requires large stimulus packages.
Every time the Fed and government delay, the deeper the economic damage is going to be.
With the amount of stimulus that they are discussing coming into the market, it is difficult not to see how it can't cause the US dollar to lose even more value and for inflation to increase significantly.
We may be looking at a situation like we saw in the 1970s, with inflation rising and interest rates hitting 14 percent or more.
Precious metals are a traditional safe haven during such times.
You can convert your fiat currencies into gold and protect its value.
If you buy gold, you are in effect selling dollars.
Precious metals are volatile, but we recommend having one-third of your net worth in precious metals to give you the protection you need against the coming inflation and devaluation of the US dollar.
The value of gold today does not reflect its intrinsic value in relation to all the other markets.
Silver VCPMI Signals
Silver has activated a buy signal. Silver has reverted from the Variable Changing Price Momentum Indicator (VC PMI) Buy 2 level of $26.20. Silver is moving fast.
We recommended this morning in our private trading room to cover any short positions.
We expect a reversion to occur.
We appear to have found buyers.
By trading above $26.20, silver has activated a buy signal.
Silver went from $24 to $30 during the news about shorting various markets, and has now come down to around $26 again.
If Reddit traders came into silver, they probably got hurt.
Silver is a contrarian indicator, because central banks and big banks hold large amounts of silver.
JP Morgan has a huge amount of silver, so they can come into the market whenever they want to cash in, which is what happened.
We had a $4 move in just a few days.
Now silver is testing the extreme levels below the mean.
We did fill the gap, which happens before big moves.
We are looking to add to our long term position all the way down to $26.
This was a bull trap.
$26.20 is the buy trigger.
We expect that buyers who did not buy in the physical market at a reasonable price are going to jump into the futures market.
It is the only place left to get into the silver and gold markets.
These moves offer incredible opportunities.
The fact that silver has not reacted as everyone expected, does not mean that it isn't going to move up fast.
Gold VCPMI Signals
We have a fast market to the downside in gold, down about $48.
Gold almost came down to the monthly Buy 1 level of $1781.
We are now getting on the long side of gold.
These levels have been expected since the beginning of the month.
$1810 is the annual average price.
$1881 is the monthly Buy 1 level and the low so far is $1884.60.
We will see if we are going to find buyers before that Buy 1 level or if we are going to find buyers before then.
The market appears to have found buyers before the expected monthly low of $1781.
If this low holds, then it could be the completion of this correction.
Gold has come down and tested the daily, which is neutral because it traded below the daily numbers.
It then integrates into the weekly and monthly levels.
The monthly level of $1781 is the next target.
If we get back above $1807, it will be a very strong signal since it is a harmonic relationship with the annual signal of $1810 and the Buy 2 weekly of $1807.
A move up would complete the daily, weekly, monthly and annual VC PMI buy trigger points.
Closing above $1810 would validate the completion of the correction with higher levels or more buyers coming into the market at higher levels.
Closing above it would be a strong signal that the $1854 to $1874 targets would be activated.
The monthly VC PMI mean is $1874. On January 29, gold reached $1878, which was the monthly target we had been working with.
Gold had been trading between the yearly and monthly average prices.
The range is between $1874 and $1810, and the Buy 1 monthly level is $1781, so we have a clear picture of what to expect.
Now we are waiting for the market to confirm it.
For trading, one of the keys to learn is when to wait and to learn patience.
You have to manage your emotions.
Rely on your system - the VC PMI in this case.
Trust it.
Gold and silver are in pockets of support.
They are both likely to move up from these levels.
At these levels, central banks and hedge funds are coming in to cover their shorts, which leads to these short-covering rallies.
Central banks have increased their short positions and they are carrying $35 or $38 billion in short positions in silver (COT Reports).
They have to protect their positions with all they have.
If we have another run in the physical market, where you can't get physical gold or silver, then the short sellers are going to have to go into the futures market to meet their short obligations, which could devastate the central banks and hedge funds as the price shoots up.
We highly recommend buying gold and silver at these extreme below the mean levels.
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