We need ‘REAL MONEY’ and greed a knock on the head

Predictions for Gold at close 1st May, 2020


Gold Price Forecast relative to
Long Term Monthly
(LT-M) – Medium Term Weekly (MT-W) – Short Term Daily (ST-D) – and Hourly (not shown) data

(Previous week in brackets)


Gold/USD LT-M MT-W ST-D
1698 (1727)
Trend ↑ (↓) ↑ (↑) ↓ (↓)
% Risk
Weight
80 (80) 72 (72) 50 (80)
Allocation 100% (100%)

Gold/USD live price


We need ‘REAL MONEY’ and greed a knock on the head

As people with influencial political status start talking about 100+ year Corona debt financing, there is clearly something very wrong in the way we think. There will have to be a balance between getting the national households in shape again and a certain level of sacrifice. This may mean that if and when the Elite managers of the world’s finances decide we need ‘Real money’ again, simply because there is no alternative, they need to strike that balance between the system monopolies and the people. We are pretty sure that such ‘Reset’ must also involve a significant scarifice from the wealthier taxpayer. This is where greed must be substituted for solidarity to some extend.
For the Gold market today we see that the Long term Monthly risk weight turned up on the first closing date of the month after a three months wide range consolidation. This is a technical yet significant matter as we use a standard 14 period analysis for Stochastic and RSI with a standard 9 period for the MACD.
History tells us that as Primary trends resume, as is the case with gold, we must see bearish divergence in weekly and monthly time frames, usually more than once. So far, we have seen none that qualify as such, hence we stay fully committed to the Gold trade investment. Short term corrections at this stage, being 60% above the Dec 2015 low, mean little. No Change.

24 April: Last week we started the discussion of a return to a possible Gold standard for all major fiat currencies. We did not mention a Gold standard as such but there is simply no alternative anymore due to the expected massive increase in public debt everywhere in the world. Teams within Worldbank, IMF, ECB, BIS and central banks around the globe must be sweating at alternative options to repair the unprecedented damage being done.
Unfortunately there are no other options that can gain trust like precious metals. Central banks around the globe have been accumulating gold again or least have maintained their gold reserves at stable levels since 2014 and there is a reason for that. Yet they don’t like oridnary investors hoarding gold, but they do.
Canada and the UK as majors and some other are a few of the exceptions, so they will need to pay a price. If we look at the major currency blocks in the world, Eurozone as a whole looks to be in a stronger position with post Corona public debt still below 100% of Eurozone GDP. But that still needs to come down substantially too as the post Corona debt levels are not sustainable in Europe because the most hurt countries like Spain, Italy and France will never be able to turn the corner with expected budget restraints. And the same proably applies to Germany and The Netherlands. With Southern Europe Debt to GDP well above 100% this simply must be reversed and the only possible way to avoid social and political unrest is a devaluation of the EURO against Gold and Silver by a factor of 7 to 8. This is a simple and workable solution that can subsequently be managed by regulation. We predict that any other solution will drive Europe into a black hole. The same applies to all other major nations around the globe and it also depends on solidarity from the strongest economies whether the only proper debt solution via hard assets has any chance of success.
It requires a very smart market play that may even involve a partial confiscation order if certain conditions cannot be met. All set against solidarity, brotherhood, and common interest.
Europe as a whole has GDP of about €16T and public debt, post Corona, of somewhere between €11.5 and €13T. This average will have to come closer to 50% in order to create a widely trusted base footing and leave room for badly needed government financing of major infrastructure projects in all European countries. European countries have 11 tonnes of Gold reserves. A €5T desired drop in Public Debt, post Corona, values gold at €15,000 or at least well above €10,000 depending on the actual gross numbers to be agreed. This is higher than the initial analysis value done for Italy last week.

A study initiated by the World Gold Council in 2014 and undertaken by Boston firm New Frontier Advisory concluded that a diversified portfolio with between 4 and 10% Gold, depending on base currency, between 1971 and 2014 would have performed better than a similar asset
diversifcation without Gold.
In light of this, pension funds should always carriy a minimum insurance exposure of 2 to 3% in precious metals which most haven’t.
The pension fund supervisor in the Netherlands, the Dutch Central Bank, ordered the sale of a strategic 13% of total assets gold position taken in 2009 by the Glass workers pension fund. In 2014 a court in Rotterdam decided that the Central Bank could not sufficiently substantiate the reasons and risk for that instruction and was ordered to compensate about €5 million.
Now that Gold has closed at an all time high against the Swiss France last week, Gold/USD is the only pair yet to score an all time high. Even though the Long term and medium risk weight is moving into overbought territory, the trend development is not showing any clear sign of getting tired and experience learns that the present persistent rally is typical for a further massive price extension to develop before any bearish divergence signals surface.

For both technical reasons and very fundamental reasons due to these unusual circumstances, we will stay fully allocated to Gold.


SILVER FORECAST

(Previous week in brackets)

Silver/USD LT-M MT-W ST-D
14.91 (15.16)
Trend ↓ (↓) ↓ (↑) ↑ (↑)
% Risk
Weight
40 (43) 45 (45) 43 (53)
Allocation 100% (100%)

Silver/USD live price


Even though the weekly risk weight turned marginally down at the close on May 1st, the Daily is sloping down more rapidly without much price change. This usually signal that a bottom is in the making. That bottom could be supported by the Monthly risk weight turning up again in a bullish divergence formation. Hence no change staying fully allocated to Silver as well.

24 April: Silver will follow in Gold’s footsteps which hopefully weigh heavy. The weekly timeframe bullish divergence was confirmed last week and continues even though silver remains relatively weak. The same fundamental approach applies as well. It is tempting to switch more gold to silver even, but that would be opportunistic greed and should be avoided under these bizarre circumstances. No Change


GOLD/SILVER Ratio Price Risk Analysis

(Previous week in brackets)

GOLD/SILVER Ratio LT-M MT-W ST-D
112.85 (110.00)
Trend ↓ (↑) ↑ (↓) ↓ (↑)
% Risk
Weight
72 (75) 60 (58) 60 (75)
Allocation 50/50 AU/AG (50/50 AU/AG)

Gold/Silver Ratio live price


The May 1 close did turn the Monthly into confirmed bearish divergence as the trend turned from ‘up’ to ‘down’ although much can happen during May to temporarily reverse that again. This ratio has behaved in such a volatile manner that we cannot exclude another manipulated attempt to drive silver down and small investors into margin calls probably leading to bearish divergence. Physical Silver is the asset to own and the overall risk to own silver and stay with the ‘patience to equilibrium’ approach seems very low, also from a historic perspective. No Change.

24 April: The ratio is not out of the woods yet. The bearish divergence in the Monthly timeframe will hard to not materialize. Silver has behaved like a suffering commodity whilst it can be stored relatively cheaply at large quantities and serve as a store of wealth. Someday in the near future this will be better understood. The ratio will return to equilibrium as it always has. No Change


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