EC Gold: China Is Back In The Game

It’s time for the queen of assets to rest and consolidate. Nothing goes up in a straight line, and that’s certainly true for gold!

Double-click to enlarge this daily gold chart.

A pullback to about $1250 would be a healthy 50% retracement of the $100 rally from $1200 to $1300.

Gold begins 2019 with some very positive news in play. 

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After a two-year hiatus, China’s central bank is back in gold market action!

The bank had been consistently buying about 15-20 tons of gold a month. When those purchases are added to buying from Russia and other central banks, they are quite price-supportive.

It’s great to see China back on the buy, and analysts in India are projecting a ramp-up in gold imports there of about 20% for the first six months of 2019.

The ECB (Europe’s central bank) is projecting higher inflation and easing growth for 2019.

The love trade is healthy, the central bank trade is healthy, and global stock markets are on the rocks.

(Click on image to enlarge)

I’m a bit worried that the US stock market rally could peter out quickly.

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Institutional money managers are cutting back their allocations to US equities, and rightly so.

The business cycle is entering the eighth and ninth innings, wage inflation is poised to spike in full-time jobs, and earnings have clearly plateaued.

(Click on image to enlarge)

China’s central bank and government have vastly more “wiggle room” than America’s do to stimulate the economy.

China’s stimulus is inflationary, and that’s good news for gold.

The US government is shut down. That’s not a position of strength, to put it mildly. These shutdowns have happened so many times that citizens are now numb and don’t seem to care. 

It’s not a good thing; the government just can’t seem to break its addiction to borrowing more and more money. 

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