Gold: Don't Get Left Behind The Short Squeeze

Gold

Wednesday 7 am PST. Gold is at $1851.70, up $12.30. The market is trading above the Variable Changing Price Momentum (VC PMI) daily, weekly, and monthly average prices. Although it does not identify a day-trading signal, it does identify the trend-momentum of the market. With the market above the average daily, weekly, and monthly prices we are in an uptrend. The targets we are looking at for the day is $1870, as the Sell 1 level. The weekly target is $1874. The daily Sell 2 level is $1898. The weekly Sell 2 level is $1906. So the first target is $1870 to $1874. The prices almost match harmonically, which is a powerful sign.

Courtesy: TDAmeritrade

NUGT is sharply higher, as are the other derivatives. We have confirmation that the low that we saw yesterday into this area of $1824 could be the second higher low, confirming that the bottom was made at $1767 on November 30. It did not reach $1822, which was the daily level. When the market yesterday came down toward the Buy 2 level yesterday, we reached the weekly levels of support. This is the area where buyers are likely to come into the market.

After the $2089 high of gold in the summer, gold has moved down about 50% from that high. Now we have established a low, which appears to be a completion of that retracement. It looks like gold may be setting up to once again challenge those highs. The $1768 level, which is the recent low, is potentially going to be the annual low.

Our goal is to increase our holdings in gold in, long term. We like what we are seeing in gold. We continue to buy corrections.

Fundamentals

A high was reached on November 9, when the efficacy of the vaccines was announced. The market, however, is not trading based on vaccine news. Gold is looking at the damage that was done by the pandemic. It devastated the world’s economy. Unemployment is still at around 10 million unemployed. We have yet to see the effect of the second lockdown and the economic impact it's going to have on some of the small businesses that survived the first wave. They may not survive this second lockdown. That means there will be more economic damage and more pressure on the Federal Reserve to print more money and pump more stimulus into the economy.

Courtesy: Ticker Tocker

More pressure is being put on the system. Confidence is being tested in the current system. Many people have been a victim of the system collapsing. The system was manipulated to create an elite group who took advantage of the system by keeping interest rates low, printing more and more money, and creating a debt economic system. This system has led to the biggest wealth gap in U.S. history. Very few are in a position to borrow money, but those who are can borrow at almost zero interest and invest it, such as in stocks, and reap major profits. A lot of these disparities in the system are being questioned and have become hugely unstable. Whenever economic systems historically collapsed, gold retained its value. The US dollar has already lost 99% of its value against gold since 1971 when the US went off the gold standard. Very few notice the silent killer that is inflation.

More recently, grain and soybean prices are exploding, and are a major signal that inflation is already here. Soybeans are up 50% recently. The inflation now has not reached Main Street yet, it's mostly in stocks.

Interest rates have been cut to almost zero, while at the same time the Fed has quadrupled their balance sheet since 2008 at a staggering rate. In the past year, the graph for debt looks like a hockey stick, straight up, which is why interest rates had to come down to near zero or how could they pay for that debt. With debt so high, interest rates will have to remain low for a long time. If the economy begins to pick up and inflation starts, what are they going to do? If they raise rates, the debt will quickly become unmanageable.

Amidst all the news and chatter, we use the VC PMI to focus on what the market is telling us in order to trade without emotion.

GBTC Grayscale Bitcoin Investment Trust

We also trade GBTC, the Grayscale Bitcoin Trust. We do not believe that Bitcoin is a currency. To compare it to gold, which has been around for thousands of years, is a mistake. Bitcoin has only been around for about 10 years. We trade it, but we don’t see it replacing gold either in our portfolio or as a currency. Bitcoin is not a Tier One asset. You cannot borrow against it. Once something is all over the media, it usually means it's headed for disaster. It appears we are likely to move into a multi-month correction. GBTC hit 24.12, which is high and we took our money out of Bitcoin and put it into gold. We strongly recommend not taking money out of gold and buying Bitcoin. That would be a big mistake.

Central banks may soon issue virtual currencies, which will regulate Bitcoin. At the least, they would heavily regulate other virtual currencies that are not backed by a government. Regulation for Bitcoin and virtual currencies is coming, so it's a big risk to put it all in Bitcoin. Be careful. Be prudent of the inherent risks, many of which have not been defined.

We are looking to trade GBTC on the long side. It appears we are coming down to a level of support. It's a great tradable instrument because it has tremendous volatility. That means it's great for short-term trading if you can manage that volatility with a trading system, such as the VC PMI. We just got a buy signal on GBTC, so we are buying it long at 19.45.