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A Must-See Gold Chart For Serious Investors And Traders, Part 3 – Ignore This Key Data At Your Own Peril

Why is this gold chart a must-see chart for serious investors and traders?  The answer is simple.  Those who have followed along have profited handsomely by buying a large core position aggressively in $600s, selling half of the core position at $1904 and selling the remaining half at $1757, undertaking a large number of profitable short-term trades from the long side during the gold bull market, and undertaking a large number of short-term trades from the short side to profit from the gold bear market. 

At The Arora Report, we rely heavily on adaptive algorithms that take into account many, many factors.  In our research, the four most important factors at this time are technicals, quality of ownership, inflation expectation momentum, and sentiment momentum.  All of the four important factors are shown on the chart of popular SPDR Gold Shares ETF (GLD).

This article is Part 3 of this series and will explore inflation expectation momentum.  Part 1 explored technicals and can be found here.  The chart has been updated since Part 1.  Part 2 explored quality of ownership and can be found here.  The chart has been updated since Part 2.

Please click here for a large chart.

Gold price is influenced by inflation expectation momentum on a worldwide basis.  Therefore at The Arora Report, we make this inquiry into the world’s 10 largest economies.

Our inflation inquiry consists of the following parts:

  • Long-term inflation trends
  • Medium-term inflation trends
  • Short-term inflation trends
  • Long-term future inflation expectations
  • Medium-term future inflation expectations
  • Short-term future inflation expectations
  • Composite inflation expectation momentum

The chart shows inflation expectation momentum from 2007, when we made an unequivocal call to aggressively buy gold, to the present.  You will notice that there is a high correlation between the gold price and the inflation expectation momentum.

In the beginning of 2015, gold made a strong up move.  However as the chart shows, this up move occurred during a period of falling inflation expectation momentum.  The chart also shows that as detected by our proprietary algorithms, the up move in gold has been caused by aggressive buying by the momo crowd; there has been no buying by the smart money.  The smart money has not been buying gold, in part, because of falling inflation expectation momentum. 

The up move of early 2015 is not likely to be sustained unless either inflation expectation momentum starts rising, and/or sentiment momentum changes from high at present to extreme low as it was in December 2014.  The chart also shows sentiment momentum.

Shown below are the long-term annotated inflation charts of the world’s four largest economies: U.S., Eurozone, China, and Japan.

Please click here for a larger chart of the United States.

Please click here for a larger chart of Eurozone.

Please click here for a larger chart of China.

Please click here for a larger chart of Japan.

Please note that long-term, medium-term, and short-term inflation trends are lower in all four economies with the exception of Japan where medium-term trend is higher due to Abenomics.  However, the inflation caused by Abenomics seems to have mostly run its course.

Lately, the momo crowd often buys gold as a hedge against deflation.  However, such buying does not stand the scrutiny of historical gold price movements over the very long history.  Historically, gold is a hedge against inflation and gold does poorly during periods of deflation or disinflation.

Current Ratings On Gold And Silver.

Our timing models on gold and silver are much more sophisticated and take into account many more factors in addition to the foregoing.   Some of the inputs are adaptive, i.e., their weight changes based on conditions and co-relations. The adaptive nature of the algorithm has been the most important reason behind consistently accurate calls on gold and silver by The Arora Report over the years.  Experience has shown that algorithms that are static stop working after a while because market conditions change.   For this reason, investors and traders should avoid algorithms that are fixed.

Here are our current ratings.

  • Negative in the very, very short-term.
  • Negative in the very short-term.
  • Negative in the short-term.
  • Mild Positive in the medium-term.
  • Negative in the long-term.
  • Positive in the very long-term.

These ratings are reviewed daily and changed frequently to help both long-term investors and short-term traders.  These ratings are used by bullion dealers, jewelers and investors across the globe.  For definition of time frames, please click here.

Full Disclosure: As appropriate, subscribers to The Arora Report are provided precise buy zones and sell zones for gold, silver, platinum, palladium and miners.  Further, subscribers to The Arora Report may undertake short-term trading positions in addition to the very long-term generational opportunities.

By Nigam Arora
Chief Investment Officer
Courtesy of www.TheAroraReport.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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