There is no stopping the rise in the price of gold. As long as world Central Bankers continue to increase the quantity of fiat currencies, because Gold’s production is limited, a simple supply and demand equation predicts gold must go higher. – Robert McHugh, McHugh’s Market Forecasting & Trading Report
The Fed may have opened Pandora’s Box with regard to its ability to continue holding down the price gold. From Yellen’s press conference:
Let me be clear that negative interest rates was not something that we considered very seriously at all today. It was not one of our main policy options…But if the outlook was to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context…
Hmmm. So negative interest rates and more QE was indeed discussed at the FOMC meeting. Yellen thereby serendipitously confirmed that another big slug of money printing is on the table at the Fed.
As best expressed by Bill King of the The King Report:
The Fed is beyond moving goal posts; they’ve abused that concept to the nth degree. So, Yellen introduced another goal post when she said the labor force participation rate is still far below trend. Another point about the Fed: Its projections and economic forecasts are worthless. They have been consistently wrong for years. Why should anyone heed their sorry economic forecasts?
I’m starting to think we are coming into a period similar to Sept/Oct 2008, only this time the problems are 10x more severe and the the manipulative force put on the metals is 10x more severe. In response, per Newton’s 3rd Law of Motion, the reaction by the metals to the manipulative action will 10x more powerful than it was in 2008.
With that last idea in mind, I wanted to post the graph that accompanies the quote at the top from Robert McHugh. While I’m not in any regard an Elliot Waver, over long periods of time there are discernible cycles found in nature. While trading markets are largely artificial now, to the extent that natural cycles ultimately underlie the markets and the graph below reflects this possible reality as it applies to gold – click to enlarge:
As you can see from the graph to the left, the Elliot Wave cycle theory is predicting a big move higher for gold (and silver, of course).
On a stand-alone basis, this idea might not have validity. However, in conjunction with all of the bullish fundamental variables which would support a significantly higher price of gold, the Elliot Wave set-up has a high degree legitimacy.
Furthermore, as a reliable contrarian indicator, the market sentiment toward gold is at one of its lowest levels in the last decade:
I really think there’s a serious problem in the supply of physical silver. The mint announced another 20% allocation cut-back two days ago. This is NOT a refinery supply issue – this is a raw material supply issue. And this is another fundamental supply/demand variable that could launch the precious metals into orbit, especially given the potential for igniting a short-squeeze in the paper bullion markets.