Monday , 11 December 2023

Explosion To the Upside Coming In the Dollar Price Of Gold – Here’s Why (+3K Views)

James Rickards…There are many compelling reasons why gold should outperform over the coming months.

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  1. Deteriorating relations between the U.S. and Russia will only accelerate Russia’s efforts to diversify its reserves away from dollar assets (which can be frozen by the U.S. on a moment’s notice) to gold assets, which are immune to asset freezes and seizures.
  2. The countdown to war with North Korea is underway…A U.S. attack on the North Korean nuclear and missile weapons programs is likely by mid-2018.
  3. Finally, we have to deal with our friends at the Fed. Good jobs numbers have given life to the view that the Fed will raise interest rates next month. The standard answer is that rate hikes make the dollar stronger and are a head wind for the dollar price of gold…[BUT] a weak dollar is the Fed’s only chance for more inflation. The way to get a weak dollar is to delay rate hikes indefinitely, and that’s what I believe the Fed will do – and a weak dollar means a higher dollar price for gold.

Current levels look like the last stop before $1,300 per [troy] ounce. After that, a price surge is likely as buyers jump on the bandwagon, and then it’s up, up and away.

Why do I say that? Because there’s an old saying that “a picture is worth a thousand words.” The chart below is one of the most powerful bullish indicators I’ve ever seen:

The 10-year chart for the dollar price of gold shows that gold prices have been converging into a narrow funnel between two price trends — one trending higher and one lower — for the past six years.

Since gold will not remain in that funnel much longer (because it converges to a fixed price) gold will likely “break out” to the upside or downside, typically with a huge move that disrupts the pattern. At the extreme, this could imply a gold price on its way to $1,800 or $800 per ounce. Which will it be? [Harry Dent say: Mark My Words: “Gold Will Drop To $650-$750 First, Then Soar To $5,000!” ]

The evidence overwhelmingly supports the thesis that gold will break out to the upside because:

  1. Central banks are determined to get more inflation and will flip to easing policies if that’s what it takes,
  2. geopolitical risks are piling up from North Korea, to Saudi Arabia, to the South China Sea and beyond,
  3. the failure of the Trump agenda has put the stock market on edge and a substantial market correction may be in the cards and
  4. acute shortages of physical gold have also set the stage for a delivery failure or a short squeeze.

Any one of the above developments is enough to send gold soaring in response to a panic or as part of a flight to quality. The only force that could take gold lower is deflation, and that is the one thing central banks will never allow…

Get ready for an explosion to the upside in the dollar price of gold. Make sure you have your physical gold and gold mining shares before the breakout begins.

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