Gold: Ready To Rumble

Fundamentals

Gold represents today a major economic indicator in several ways: as a commodity, as a safe haven, and since March as a currency. Gold came down from the $2089 high, which showed that the market was anticipating the damage caused back in March by the pandemic. Therefore, there was a $600 premium per ounce in gold. In March, the Fed announced that there were no limits to quantitative easing or to the stimulus, which then led to the stock market rallying to record levels.

The E-mini hit 3587 in an amazing move since March, which discounted the pandemic’s damage and predicted that the stimulus from the Fed would be extremely bullish for the stock market. The Fed appears willing to use 10% of GDP or $20 trillion in the form of stimulus, of which they have only used a small portion of that percentage as yet.

A key question is who is going to pay for all of this printing of money that is going on. Basically, our children’s future is being jeopardized by printing so much money and taking on such high debt levels for the future. Whoever wins the election next week, they will have to deal with this increasing level of debt, which is reaching crisis levels. The debt levels will cause tremendous volatility, especially for the US dollar. It will further erode the US dollar as the world’s reserve currency, which has been in decline for decades. Globally, currencies are under great stress as they lose value.

Infections continue to rise rapidly. The end of the pandemic appears to be ever farther in the future. The current US administration does not appear to even think the pandemic is a major problem. Therefore, there are mixed messages. Many people and families are in dire straits. Hyperinflation may occur and the US has never experienced such a thing. The key is to understand that the economic system is under severe stress and you have to find ways to survive. One way is to use a trading system to protect and build wealth in gold.

We focus on trading gold, silver, and the E-mini S&P. The metals show where inflation is going. They are already showing that we are in an inflationary environment. In some commodities, we are already in a hyperinflationary environment with prices rising extremely rapidly.

Very few people are in the equities markets. Most people do not understand how the world’s economy is collapsing, yet the stock market is racing up. The Fed is printing money, which is artificially propping up the stock market. Interest rates are almost zero, which means institutions and rich people can borrow money for almost free and then put it in the stock market and make amazing returns. Of course, it cannot last. The system cannot continue as it is for long.

Countries increasingly have debts that are greater than their annual GDP. The IMF is planning a restart for the world economy in order to deal with the current crisis and provide a foundation for a future more stable economy. We are never returning to the old normal or the old economic system. We have to create a new system; the key question is what sort of system will it be and what role the US dollar will play in that system? What role will China play? It is a historic time and historic times provide great stress, but also great opportunities. You can use this volatile time to make tremendous returns trading precious metals, which are the other side of the US dollar. As the US declines, gold should rise. It is a golden opportunity.

In any case, fundamentals tend to lag the market, so we use technicals to let the market show us where it is likely to go on a daily basis.

Technicals

Gold is at $1908.90, up $3.50. Silver is down slightly at $24.4950, but it is catching a bid, too. The E-mini S&P is last at 3421, down about 30 points. The average price for gold today is $1905 according to the Variable Changing Price Momentum Indicator (VC PMI). The extreme daily Sell 1 level above that mean is $1915, while the Sell 2 level is $1927. The extreme level below for the daily Buy 1 level is $1893 and the Buy 2 daily level is at $1883.

Courtesy: TickerTocker

The average weekly is at $1911. The extreme weekly level above that mean is the Sell 1 at $1928 and the Sell 2 is at $1953. The extreme weekly level below the mean is the Buy 1 level at $1886 and the Buy 2 at $1869.

We use the VC PMI to identify and then trade at the extreme levels above or below the daily, weekly, or monthly mean. The highest probability trades occur when the market is at the extreme above or below the mean. The Buy 1 or Sell 1 levels offer a 90% probability of the market reverting back to the mean, while the Buy 2 and Sell 2 levels offer a 95% probability of the market reverting from those levels to the mean. In this way, the VC PMI serves as a GPS for your trading. If the market trades at those levels, it is a trigger to buy or sell into the market, with the levels above for buys or below for sells as the targets, at which point you can get out of the market.

The gold market appears to be gaining momentum on the long side, especially in the derivatives under the market. You want to be long with at least $1915 as the target. The VC PMI tells us that at $1915, $1927, or $1953 supply is likely to come into the market and the price will likely revert back toward the mean.

The market is trading between the daily average of $1905 and the weekly average of $1911, which means there is a 50/50 probability of the market going up or down. Do not trade around the mean. Wait for the market to move to an extreme above or below the market in order to enter a trade. The extremes are where the higher probability trades occur. Wait for the extreme, and you can make profitable trades.

In silver, the weekly target of $24.78 is on track. The daily has activated a second buy trigger at $24.47. The targets for the rest of today are around $24.73 to $24.78.

The E-mini has come down and is activating a trend alert into the weekly Buy 1 level. It is oversold daily. It tested 3406. The VC PMI is telling us that the market has entered a high probability area where we are likely to find buyers. Do not go short in this area. Look for closes above 3406 to go long. It may come down to 3357 and become even more oversold. You should be looking to buy the market as buyers come into the market. We have activated a weekly trigger point. Closing above 3406 will activate a buy trigger if it doesn’t come down to 3357. Watch the market and see which way it tells you it is going to go.