Earlier in my post, you have heard me saying that I believe gold...

  1. 19,993 Posts.
    lightbulb Created with Sketch. 1943
    Earlier in my post, you have heard me saying that I believe gold could reach USD1800-1900/oz - you can see the cup and saucer formation
    https://www.marketscreener.com/GOLD-4947/charts/

    There are several reasons that could well propel gold higher , possibly another 20-25% but of course there would be a short consolidation sometime

    1) Supply worldwide for gold is dwindling and cost of production is going up [ short supply in mining for gold is normally the outcome of poor economics for gold mining when gold price had been low, so the past few years when gold prices were going nowhere, that didnt encourage gold discovery)
    2) Demand is ever increasing, firstly prompted by Russia and China buying golds for their reserves and dumping US Treasuries, secondly central bankers the world over are increasing their gold purchases and thirdly high net worth individuals are buying gold as a store of wealth
    3) Gold normally goes higher when the USD goes lower , and the USD is likely to go lower because 1) interest rates will go lower and 2) Trump wants to see it lower , and gold also usually is inversely correlated with equities, as you can see gold rose as equities fell (which is why gold''s rise is a bad omen for the market) which makes it a decent hedge against falling equity prices. Gold also rises when interest rate is low because there is no to lower opportunity cost to holding gold
    4) Technically, gold is on a bull trend and global uncertainties, geopolitics and economics have made it more attractive to hold- and you can expect more market participants to diversify to gold either as a hedge / insurance or to ride the trend or both
    5) Consolidation in the gold industry where large gold miners have merged or merging
    6) The Dow to Gold ratio currently sits around 17 x  and you can see the chart below that this is starting to turn down- you can also see a pattern that the ratio usually sinks lower as we approach a recession or in the midst of one . In 2008, it went down to 7-8x ; if the Dow falls 30% from here (in the lead up to a recession in late 2020/ early 2021) and gold rises to $2000/0z . the Dow/Gold ratio could get closer to 9x. In the 1929-31 Great Depression, it fell to 2x.
    https://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart
 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.