The Global Gold Bull is Back

That’d be right.

On the first day I’ve had off from writing The Rum Rebellion since I started it in November last year, the gold price explodes!

[If you missed my emails last week, I explained that from now on I write Monday to Wednesday, Vern will take the helm on Thursday and Friday, while Selva will write the weekend edition.]

We kicked off the new schedule on Friday, which was not great timing from my perspective. The US dollar gold price popped out of a six-year trading range in Asian trade on Thursday afternoon, while the Aussie dollar gold price went through $2,000 an ounce for the first time.

As I was still keen to give you , an update, I hastily recorded a video on Friday. If you missed it, you can check it out here.

The main chart to focus on is the first one I showed in the video — the US dollar gold price. It is very significant.

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As you can see below, it broke sharply above support last week, with the futures price closing the week at US$1,400 an ounce. This is the highest price in six years.

Money Morning

Source: Optuma
[Click to open new window]

Multi-year highs are always important to look out for. They’re often (but not always) bullish signals.

What makes this breakout even more significant is the amount of time it’s taken. After peaking in 2011, the gold price then spent four and a half years in a deep bear market. The bottom finally came in late 2015.

You then saw a big rally in 2016, but it was too far, too fast. It was too early for a bull market to return. Gold had to spend more time going sideways before it was ready to move sustainably higher.

Prolonged sideways moves in an asset or stock price — especially when the sideways moves are a part of a bottoming pattern — are always interesting to observe.

In technical jargon, this pattern is referred to as accumulation. That is, investors accumulate whatever stock or gold is offered at lower prices. This helps prices form a bottom.

This is clearly what happened with gold.

We are set to see a big move in gold price

Now, a general rule of charting is that the longer a stock or asset spends in the accumulation phase, the bigger its move will be when it finally breaks out.

That’s why I believe you’re set to see a very big move in the gold price in the months ahead.

Before I tell you where I think gold prices can go, I want to show you one other, very interesting aspect of the gold price chart. Take a look below…

Money Morning

Source: Optuma
[Click to open new window]

It’s the US dollar gold price from the start of the bull market back in the early 2000s. If you enlarge it, you’ll see that I’ve applied Fibonacci levels to the chart.

Using the start of the bull market in 2001 to the top in 2011, you’ll see that the gold bear market retraced EXACTLY 50% of the whole bull market run.

While not strictly a Fibonacci number, the 50% level sits midway between the Fibonacci numbers of 61.8% and 38.2%.

Having held the 50% retracement level, and with gold having just broken out to a fresh six-year high, it suggests the secular bull is back.

As a result, I think you’ll see gold making new all-time highs in US dollars in the future.

Don’t be surprised to see a pullback

In the shorter term though, the direction is harder to predict…obviously. Some further strength is possible in the next few trading sessions, as short sellers cover and panicked buyers get in at any price.

However, as you can see in the shorter-term chart below, gold is extended. It’s rallied around 10% in three weeks, which is a strong move for gold. So it would not surprise me to see the gold price correct and trade back down towards the breakout point.

Money Morning

Source: Optuma
[Click to open new window]

In Aussie dollars, you can see below that gold is extended in the short term as well. So don’t be surprised to see a pullback here.

Money Morning

Source: Optuma
[Click to open new window]

But the bottom line is this: Gold in Aussie dollars has been in a bull market for years. The breakout you saw in the US dollar gold price last week confirmed that we’re now resuming the global bull market in gold.

That means corrections and pullbacks are to be bought.

And don’t forget, the driving force behind this bull market — the stupidity, arrogance, and obstinance of central bankers — is going nowhere. They’ll be the last ones to realise the pointlessness of their craft.

Greg  

PS: In an exclusive new video interview, Greg Canavan talks all things gold with Richard Hayes, CEO of The Perth Mint. Click here to watch.


Greg Canavan approaches the investment world with an ‘ignorance is bliss’ philosophy. In a world where all the information is just a click away at all times, Greg believes we ingest too much of it. As a result, we forget how to think for ourselves, and let other people’s thoughts cloud our own.

Or worse, we only seek out the voices who are confirming our biases and narrowminded views of the truth. Either situation is not ideal. With regards to investing, this makes us follow the masses rather than our own gut instincts.

At The Rum Rebellion, fake news and unethical political persuasion are not in the least bit tolerated. It denounces the heavy amount of government influence which the public accommodates.

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