Gold and the PCE: Prepare for Blastoff
2024.08.27 15:34
As the tricky stock market crash season months of September and October approach, I’ve urged heavily invested stock enthusiasts to consider buying put option insurance, allocating 2%-5% of the portfolio’s value for the purchase.
It’s not a top call for the miners, gold, or . It’s simple fire insurance for the gold stocks “house”.
The good news is that while the short-term picture for gold may be tricky, the medium-term and long-term outlooks are both fantastic.
Silly Western politicians use tariff taxes like baby bottles for inefficient corporations who are making overpriced products for inflation-waylaid consumers.
The politicians created the inflation with their failed wars against both the Corona virus and Russia, and now they are throwing tariff tax gas on the fire.
Some potential good news. Savvy Chinese car makers setting up in Mexico may be able to meet free trade treaty requirements and get US consumers the cars they need… at half the outrageous price they are paying now.
Even if that doesn’t happen, China will become an even more dominant car maker than it already is, and the citizens will celebrate… by buying lots of gold.
Given the rising tensions (and outright war) in the mid-East, it’s likely that the bullish double bottom overwhelms the H&S bear continuation pattern, and the price moves up towards $90 again.
This is occurring as the Fed prepares to launch its next attack on the nation’s elderly savers… with cuts that take already-low rates down to the 2%-3% range.
For out-of-control debtors (led by the US government), any rate above zero is a concern, and on that note, the key chart. I urged investors to prepare for a lengthy (about 2 years) pause once rates rallied to the important 5% zone, and to focus on gold from there. Gold is now 30% higher from the point of that call.
Once the pause in rates is over (expected around year 2026), gold is likely to dip, and rates should begin a disturbing rise towards the key 8% zone. From there, US consumers may start to look like inflated shrimps cooking on rising rate barbeques…
And frenzied buying of precious metals will begin.
I’m predicting that a big downwards “revision of the revision” lies ahead, and it could ultimately mean 50% less jobs have been created than the government has claimed.
It’s clear that the risk of a stagflation-oriented recession is immense, and it’s even more clear that all investors need to own more gold.
The important weekly gold chart. Note the Oct-Nov 2023 “chart-perfect” arrival of rates at 5% as gold arrived at my big buy zone of $1810. Now rates have a H&S top pattern, and gold is bursting up from a flag-like rectangular drift. That breakout opens the door for a rally to $2800-$3000.
The PCE inflation report is Jay Powell’s favourite inflation indicator, and the next one comes out on Friday. Significant volatility should be expected as the report could be dovish enough for Jay to announce a 50basis point cut after the September 18 FOMC meet.
Silver? As price broke out over $32, I urged silver bugs to prepare for a pullback to $26, and possibly to $22. The pullback is likely almost over now, and the PCE will probably be the catalyst for the next upside blast. That should see silver reach $35 and pause one last time before charging to a new all-time high.
It’s possible that silver could be trading in early 2025 at $50 with gold at $3000.
What about the miners? Basis the XAU versus gold, gold stocks are ending an almost 40year bear market, and starting what should be an equally long bull market run.
Gold stocks are likely ready to play “leap frog” against gold, and gold $3000 could coincide with 232 for the XAU. The 157 zone is significant resistance, and a pre-PCE pause is expected.
A look at the short term gold stocks action, the GDX (NYSE:) daily chart. The technical action is generally healthy, but Stochastics is now overbought and there’s a slight RSI non-confirmation with the price.
A pause ahead of Friday’s PCE seems logical. Gamblers and grub stake buyers should look for GDX to trade around $37.50 if gold dips to $2470… and buy there. More serious buying should be done if gold trades at $2430-$2410. That would likely see GDX reach its own support at $34-$32.
This isn’t a time to issue top calls for gold, silver, or the miners. It is a time for eager buyers to prepare for buy-side action ahead of the PCE, and to prepare to be sporting a very golden smile, once that report is released.
