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Politics, Fundamentals and Technicals Drive Gold Upwards to 2017

Monday November 26, 2012 15:11

We wanted to see presidential election fallout news and post election trading action before moving to our next reporting segment on precious metals markets/prices. Having fulfilled this timing hold up, we have now sat down and used a weekly gold chart that covers 2010, 2011, and 2012 to our current date, and discovered some nearly perfect technical numbers…. We were surprised at how perfect.

We do not explore data using three decimal places, as we know the stop-and-go magnet numbers for gold and silver prices within increments of $100. Rounding is automatic using those magnet prices from memory when computing our forecasts.

What surprised for this report was the latest bull cup-and-handle numbers. The price sequence within this pattern, hit three important magnet numbers on the button. This says: we’re on the right track for computing our next forecasts for gold.

You have to be very careful in forecasting annual, December cycle prices. Market controllers, holidays and end-of-year fund managers/central bankers (who fiddle with credit and stock markets) are employed to slice and dice for maximum performance. This unstable market action produces figures that can seemingly be erratic with some of them being really off the wall.

In our current situation as we write pre-open before the Monday markets on 11-26-12, we expect the following:

(We have a nine-month chart pattern for gold that was just completed showing enough visible signals for this forecast.)

Technically, we are supposed to have another gold, silver and related precious metals stocks correction as we wrap up November and travel through December 2012. We agree with this supposition but do not expect any large price drama in the selling department.

Nothing goes up in a straight line. We always have pullback, profit-taking corrections after each and every rally. This is standard stuff and should be considered just regular trading. Get used to it and expect it.

A normal gold rally from bottom-to-top-to-bottom is around six weeks for one cycle give or take a few days.

Some key points to keep in mind: (1) as metal prices go ever higher the trading range corrections go equally wider. That means harder selling events appear after the larger rally events, (2) expect that daily trading ranges from open to close will grow wider. (It was a big deal just a few years ago if gold moved in a trading range of $4-$8 for the day. Now we commonly see days of $20-$30 per day and on some days get a trading range of $55-$60.) 

If we see a stronger Elliott Wave Three up-move of $55-$60 right now with the price of gold at $1,750, what do you suppose the range will be when gold is $2,500 to $3,000? Do not be surprised to see moves of $100-$200 in one day.

The commodities exchanges on these big prices will install some very high margin requirements to insure against default on futures trading contracts.

Our technical forecast produced after days of intensive analysis in 2005 was $2,960. Since that forecast, we can see a gold price as high as $4,450 projecting from this date to 2017.

We expect to forecast gold higher than the $4,450 price but would rather refrain from suggesting those higher numbers until we can see more data with gold trading in the $2,000 to $3,000 range first.

Key Fundamentals Driving Gold Prices Higher

Precious metals traders and investors sometime compartmentalize politics and the metals markets. We often compare the two sectors as separate and distinct except for their cause and effect often seen in faster trading.

This is not the case. Political legislation, executive orders or demands of dictators (whether it comes from legitimate government or from ram-it-down-your-throat socialists), creates serious long-term trends in precious metals markets.

Other affected markets would be those in currencies and bonds. The action-reaction in precious metals is more volatile and apparent, as these markets are much smaller.

Base metals are affected too, but they move slower due to massive market size as big traders are trading them less often.

We suggest that there exists a much longer view over years (say decades) that will produce our best and serious trends. The idea best driving gold and silver prices would be: the ongoing paradigm and propensity of central bankers to print and digitize bonds, bills, credit and currencies with no apparent backing. Smoke and mirrors pseudo-assets do in fact move precious metals markets as well as others. 

Let’s pretend stuff created with stern authority creates reality.

This condition is not exclusive to the United States. For decades, central bankers have deliberately enticed individual central banks and national governments to become indebted to them, with the idea their national country collateral can be snatched upon loan failure and their very economic bones could be picked clean. Too often, much to the chagrin of borrowers, this has proved to be the case. “Loan, and rob countries” is a good business plan for banks.

This is an old game and numerous instances can be cited. Watch what they do to Greece. We got a report the Greece central bank holds six tons of gold. Who gets the gold when those new loans go bad? Assuredly they will go bad and all the players know it. This is the reason the current three-ring lender circus remains in play. Those lenders are fighting over the gold collateral. Who cares about getting paid back with the crummy fiat paper currency you just lent to them?

Perfect examples of this activity can be traced back over years with several South American nations being driven into poverty as outsiders lure them into indebtedness depravity to the extent they can never repay those loans. This is just a larger version of Ponzi with a newer twist added and promulgated on a larger international playing field.

In past years we often wondered why global Big Boy banks in New York would keep lending huge amounts of money to those poor nations knowing full well the loans would not be paid back. The old story said whole nations do not go bankrupt so consequently our loans are secure. Not anymore!

The reason of course is to strip those countries of precious assets… collateral in the ground or by taking collateralized property on aboveground improvements. Further, while the loans initially remain current, consider all the lending fees and interest collected by the lenders. Later, when the loans default, they simply take all the collateral. Hey, you can get paid three times in this game!

These bankers didn’t worry about being paid back. The loan money was just digitized crap originated from the Federal Reserve owned by the very bankers making the loans! How is that for a really cool scam?

It’s kind of like giving a real estate developer just enough cash and credit to develop and begin construction of a fine, expensive project. The lenders having done this so many times they know when those loans will go bad; and when they do they can seize the property, land and all improvements for pennies on the dollar. They loan just enough in cash and credit to set it all up and then make it fail.

It’s just a big criminal game. Set ‘em up to fail so they can hang themselves and then go in for the kill, seizing it all.

Some nations seem to be better at the game than others. Most of them are sincerely encouraged by the IMF, World Bank, Bank for International Settlements and various nefarious lending components of the United Nations…the catch-all One World Government go-to entity that’s supposed to “save us all” and oh, by the way: police us all.

Have you noticed the reluctance of Spain to take credit from the IMF or the European Central Bank to bail them out? Spanish financiers in their government understand the usurious terms and what comes later if those loans are made and then foreclosed upon.

Japan has been busy doing the same thing for decades but they have one major difference in that their citizens are hardcore savers of Yen. In our view, this has enabled Japan to print, digitize and borrow on steroids as buyers of their paper are primarily held within the nation of Japan.

In the United States, a lot of paper shuffles around in our country too, but trillions more is sold off-shore denominated in USA Dollars, the primary reserve currency of the world. Being a dominant currency the dollar is widely accepted as “Good as a Dollar” despite millions knowing otherwise.

We see numbers going all over the yard saying Japan has borrowed 200-300% of GDP. Of course, once the debt threshold of 70% of GDP borrowing has been passed, there is no going back. At that point, you have become economically dead.

Now we see some USA numbers from national government insiders working in the Budget Office, Labor Department, or Department of the Treasury. Some of those folks say America is way beyond Japanese spending. They tell us including all the entitlements, welfare schemes and others (far out-demanded by current law), the United States owes somewhere between $80 trillion and $120 trillion. That is indeed a far cry from the $16 trillion currently bandied about in the news.

It doesn’t matter, as it won’t be paid back anyway. The numbers are an impossible dream. The idea is to keep the game in play as long as possible and Kick the Can while scarfing up all the goodies.

In the United States the most common consumer theme is ‘spend it when you get it’ and if you are short, whip out the plastic and keep spending anyway. This condition creates a different can of worms but the general trends for Japan and the USA are the same: these economies and others throughout the world are ripe for a smash.

It is obvious to us (and many others with bigger accounts and more experience) that hard assets are the answer. It all starts with physical gold and silver.

Somebody please tell us when the global bond markets crash for good and we’ll tell you when this can all get better and we can start all over again, maybe with a partially backed fiat gold currency.

By Roger Wiegand
Editor Trader Tracks Newsletter

Roger Wiegand is the writer of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and long term traditional stock shares, futures and commodities trading with specifics for individual trades. Stay tuned for more of Trader Rog’s insights and predictions via his exciting new daily audio subscription. Coming soon! Details at www.wavelengthpublishing.com

Roger also is a regular contributor to The Korelin Economics Report (www.kereport.com), the highest rated daily internet radio program listened to throughout the world dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report, which airs on radio stations across the USA on Saturdays and Sundays. 

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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