Gold Prices React Amid Market Changes and Innovations
2025.01.16 10:13
For decades, I’ve been urging the CME to convert the 100-ounce futures contract to a no-margin physical market contract. I’ve also been urging them to launch a one-ounce contract.
Dumping the 100oz contract would reduce nonsensical margin-oriented volatility in the market. Most gold volatility is created by over-leveraged gamblers getting hit with endless margin calls over market news that should really move the market no more than $2-$5/oz.
The one-ounce contract would also allow more modest net worth citizens to participate in the gold market at greatly reduced fees.
The bad news is that the CME didn’t kill the 100oz contract, but the good news is that yesterday they finally launched a one-ounce “pocket rocket”.
Small investors could buy the one-ounce contract incrementally on dips in the price and then sell them at a loss for tax purposes while buying an equivalent amount from a physical dealer.
The daily gold chart. Some gold bugs may feel like there was a bit of rain on the one-ounce parade, as gold fell about $30 on yesterday’s launch day. Technically, I have no concern, and here’s why:
Gold is simply recoiling from the supply line of the triangle pattern and from previous highs resistance at $2720.
This recoil is 100% normal.
A look at the weekly chart. The only question is whether the daily chart triangle breakout occurs with gold near the demand line of the triangle and weekly chart Stochastics fully oversold
Or whether the price turns up much sooner perhaps by the end of this week. Overall, the technical situation for gold on both the daily and weekly charts is superb.
The weekly chart is in “inverse sync” with the gold charts. It’s likely making a high.
Even if it isn’t, if inflation returns, gold can surge against the while the dollar surges against other fiats.
That’s because global government debt is so gargantuan and the will to reduce that debt significantly is essentially non-existent.
This is what happens when the Fed acts as a soup kitchen that hands out candy to debt worshippers instead of a gold-themed Rock of Gibralter; the situation gets ugly.
It could soon get a lot uglier than most interest rate top callers think and “Tarifftaxflation” is just one of many items that could usher in a massive rise in rates.
A look at the daily chart. Most bond market gurus are stunned by the rise in rates, a rise that is occurring after Fed Chair Jay chopped rates twice!
They are surprised because they don’t understand long-term 40-year cycle for US rates. It bottomed in 1940, peaked in 1980, and bottomed in 2020.
Having said that, investors can expect a substantial dip in rates from the strong resistance formed by the previous highs at 5%, before rates shock the world and begin a long-term rise that is unlikely to peak until the year 2060.
The US government and its relatively tiny population (with the exception of some very savvy gold bugs!) is looking mostly irrelevant on the world’s gold-oriented stage.
What about the gold stocks? The “dividends-stripped” chart. A very positive bull wedge is in play, and the current action is likely a final recoil from the supply line of that wedge.
A solid look at the ratio chart of GDX versus gold. There’s loose inverse H&S pattern action. All technical lights on the above charts are green!
What is obviously one of the most bullish charts in all markets, the GDX weekly chart.
RSI and Stochastics are ideally postured for a momentum-oriented blast over the C&H pattern handle neckline, with RSI at about 50 and Stochastics in the sub20 zone!
Tactics: I like to see investors buy incrementally/systematically like the banks do, rather than with one single “hero” buy. For GDX, a 3-price point entry should yield spectacular results, as the breakout occurs. There’s only one thing left to say, which of course is: Have a golden day!
