Gold and Silver Current Thoughts 8-20-2015 – Sneak Peak at ETF Research Trading Service

We are in the midst of a dead cat bounce in gold and silver. Why a dead cat bounce? The research I am doing for my next book shows we are in a deflationary credit contraction, the likes of which is still to hit us hard. The Federal Reserve knows this. CNBC mouthpieces don’t. Zerohedge writers don’t. But it is coming.

For now I have said in the past that the dollar moving below 97 would be bullish for gold. The next target was 96 to continue the bull ride and we are now hovering above and below 96. A further decline will be a nice boost for gold and silver and one can’t ignore price action even though they may think that there are further declines to come. Also note that the 10 year Treasury yield is continuing to fall and ever closer to my below 2% target (that should supply some credibility as to what I see as I have been calling for lower rates since the yield was 2.45%).

Challenges to My Thinking and My Response

I get people that will challenge me from time to time as to how I can be so sure we’re going to fall to the levels I think we’re going to. I would like to post my thoughts written in an exchange yesterday on Seeking Alpha with a gentleman from a foreign country (forgive his misspellings).

United Zimba (the person’s handle fro Seeking Alpha)

Very informative article thank you. I can agree with almost all of what you write. There is one thing however that I still have a great deal of difficulty with and that is your target for a bottom price of gold between $850 and $1,000. It’s very easy after the facts to blame other people like Schiff etc. for being way off in their predictions of a bottom for gold but at the other side I really don’t see any more logic in $850 as a bottom than the logic for $1000 or $1,100 as a bottom. Any other logic than after the fact extrapolating the trendline down when prices have already come down from a former higher level/target. But you can hardly call that very usefull as a valuable prediction that makes any real sense. What I would like to know is what exactly is the superior logic behind $850 bottom for gold as opposed to a $1100 bottom or a $500 bottom. Out of which valuable concept or reasoning one should conclude the one or the other?

My reply

United Zimba, how have my calls been on predicting the prices of gold, dollar, Yen and the Euro? I have been dollar bullish for a long time and Yen/Euro negative.

Let’s have a fact check first.

Schiff is ALWAYS negative on the dollar. I have been bullish for years.

Schiff is ALWAYS bullish on gold. I have said a rising dollar would put pressure on gold.

I said we are in a deflationary credit contraction. Schiff is ALWAYS on the inflation and even hyperinflation side.

While you say “there is no sense in predicting anything in today’s manipulated markets,” I have avid readers who make comments like this which I received this week;

“Hi Doug, I’ve been following your “current thoughts” closely now for some time and I am amazed at your overall knowledge, level headedness, and incredible accuracy and timing.”

I share with everyone what I see with my 8 indicators article: Google “8 indicators gold” to read article. Wrote it in July 2014 so those who want to buy gold and time their purchases can follow along.

I wrote in April when gold was $1,198 to not buy gold now but wait. I had many clients buy on this last dip because they know to dollar cost average into a position/allocation. Actually had a record month of sales last month and have been warning of supply issues from an insiders point of view which caused me to be more bullish for a micro swing higher.

I have a subscription mining package that I sell and during this entire move down in the price of gold since April only one stock I recommended to purchase triggered long and now I have given further instructions on what I think investors should do with mining stocks that you are not aware of.

I have a subscription ETF Research Analysis that has called many great trades including some over 50% in a short time period and one over 100%.

I’m not just sitting around waiting for gold to get to my prices and I have said many times, if you read my daily Current Thoughts, what investors wanting to invest in gold should do and why when it comes to their timing.

You look at one article and make assumptions which is why you wrote what you wrote. What “superior logic” from me are you missing that you can’t follow along with what I have provided? Best to take into account the entire body of work don’t you think? Some here think I do provide “useful valuable predictions.”

Lastly, yes, I do not share 100% everything I know because I don’t have to. But I challenge you to point out flaws in my predictions over Peter Schiff’s, Mike Maloney’s and John Williams, the one’s mentioned in the article who never change their colors. You do realize I sell gold for a living and could sell a lot more if I would just be like them right?

United Zimba

Well make no mistake I do find your articles very valuable. I never have denied that, in fact I already stated in my first response that I agreed with allmost all of what you wrote. The only thing that I had some second thoughts about was your pick of a bottom for gold. And excuse me for just having discovered you only very recently and not having read your 8 indicators or your daily Current Thoughts yet. I will take a look at the entire body of work also because as I said already I am convinced you are one of the most valuable writers here on this website. Lastly I do find your predictions very valuable but on the other hand I hope you don’t resent that I have some critical remarks about your predictions.
Although not having read the enterity of your work I am of the opinion that while many of your predictions are very valuable and even might have come true to some extend nobody is really going to be able to predict the future. That is impossible. My one critical remark on your predictions was
and still is that all future gold prices are in essence only going to depend on central bankers actions or better said their reactions at economic developments. Nobody is in essence going to be able to look in the head of the central bankers in the future to know what they are going to think and how they are going to respond. Sure I know that there is deflation and on the contrary what you state Peter Shiff is also fully aware of that. The only thing he and I am not so sure about is how and when exactly are central bankers going to respond to that deflation. This is in essence the difference between you and Schiff and me. You might think that central bankers are going to respond very slowly to deflation while Schiff and I might have thought that they would react much faster to deflation with a new QE program. This is in essence the difference between us and this is in essence also determinating the bottom of the gold price.
So as a conclusion I hold on to my former comment that in essence nobody is going to know the real bottom of the gold price because that completely depends on central bankers response to economic indicators.
And while I do expect future deflationary times I am not sure how and more importantly how fast central bankers are going to respond to that.
I am sure about one thing : I can’t look in a central bankers’ head. As a consequence it is my opionion that any prediction about a bottom price of gold can inherently be nothing more than speculation.

My reply

United Zimba, thanks for the detailed response. I do accept all critical remarks as I enjoy seeing what I don’t see or knowing what I don’t know, the definition of ignorance.

 Let me say first that I haven’t ever given a bottom price for gold. I have only provided a range where I will write my all in article between $850 and $1,000 and I will provide more details as to why I chose that range when I write it (but anyone who reads me daily has some indication already).

 In the meantime, my indicators haven’t let me down in predicting micro moves. I hope this continues and I write about gold 5 days a week in helping traders see what I see. Doesn’t mean I am perfect, but ever since I started my ETF Research analysis, I have done quite well with my own trading as well as giving out good calls.

 Regarding the central bankers and their actions I do agree it can be a moot issue. However, I do feel I have a handle on what they see and what they do based on my continued research (mostly for my forthcoming book which I hope to have finished and off to the editors the middle of next month).

 Central bankers know deflation is an issue. Bernanke has said what they would do to fight it and Yellen will be no different. They have to. I have said they will do a token raise in Sept. and I haven’t read today’s minutes but I still think this to be the case. I view it more as a credibility issue and catering to the CNBC mouth pieces who have been calling for it for about a year now, lol. This will give them (where we agree) more ammunition to implement more QE in the near future, which with or without a rate I see coming (and Schiff does too).

 What Schiff and many other Austrian’s don’t consider is the depth of the credit contraction. I know this because Lew Rockwell, whom I have met and attended his Scholars Conference in Auburn, doesn’t like the fact that I even utter the word deflation. Peter never did till it was staring him in the face. Also, he doesn’t like the fact that I was dollar bullish. Both of these issues are contrary to the viewpoint of a certain group of Austrians, including Schiff, and I understand this. But I take solace in the fact that I feel I do understand it and the data I read and the way I have read the Fed overall hasn’t been too far off mark.

 What it really comes down to now, is how fast will the Fed fight deflation if indeed it is what we are fighting (which I have been making the case for since 2010 when I wrote about it in Chapter 4 of my first book, the one Rockwell didn’t want to promote because of my stance on deflation and the dollar – and yes, I’m pissed at that exclusion as to be closed minded to new thought doesn’t make for anything but a dictatorship from an Austrian point of view)?

 I actually do think the Fed will act quicker but there is one issue that is not being discussed and I am writing about in my next book; Europe and Japan and you might as well throw in China. What happens there can trump any and everything that happens here. I look to these countries and their economies, currencies, central bank actions, etc. to lead us into the future financial black hole I see coming. By default, at first, this will be dollar bullish and have a potential effect on precious metals. The pyramid up top from Exter explains all this. Treasuries I am bullish on and “eventually” gold/silver. I see the dollar moving up with gold for a bit too.

 If you want any further explanation than this you’ll have to read through my articles and Current Thoughts and/or wait for the next book to come out. I have a link for signing up for it’s release here:http://bit.ly/1HEADWw

 In a nutshell, we don’t know the timing of Fed action, but I am not sure how important that is to the reasons to own gold now and buy more in the future. If in 2009 I got within 10% or 20% of the bottom of buying the DOW, and sold at 18,000 I’d be a happy camper. That’s a minimum of a 100% return in 6 years. I find it easy to predict that gold and silver will double from even today’s prices in 6 years. My ideal prices to buy gold is $900 and silver $12, no matter what the Fed or other central banks do. I think we get there and have thought that for some time, rather than do what most other gold dealers do to drum up business and speak about a dollar crash (Schiff and Maloney) and hyperinflation (Williams). At least I am trying to provide a perfect entry point based on my research and telling it like I see it rather than ignore price action. 92 year old Richard Russell taught me that about 13 years ago and I haven’t forgot it.

 Thanks again for the reply and no offense I hope from my tone (made a bad trade this morning because I didn’t set a stop and slept through a report that I was supposed to be out of the trade beforehand and was on the defensive, lol) and I’m back to writing.

United Zimba

Thank you also for your reply. I would like to further comment that in my opionion it is even very difficult to predict a range of prices for a gold bottom. Especially when one would depend on that for one’s total gold purchasing. In my opinion it would be very risky to lay all one’s eggs in one range of gold prices that one hopes will be the bottom. Your bottom range might actually never occur and possibly you could be still waiting for it when prices have already doubled in stead of gone down to your target range. Possibly you may have a reasonably good indication of what the FED is going to do but the gold price is not only dependent on FED actions alone but also on global central bankers actions. Are you really sure you can assess the intricate interplay of central bankers globally and out of that determine a 10% bottom range? I personally wouldn’t be able for example to predict a sudden avalange of deflation completely surprizing central bankers globally. Could be that such event is highly improbable but still it can’t be ruled out in my opionion. It could however have a big influence on the price of gold and your 10% bottom range. I am not even certain whether this would cause gold to fall much further or on the contrary have the opposite effect of the price of gold exploding higher out of the fear trade. All of this makes that I am extremely doubtfull of the likelyhood of anybody really being able to even predict a 10 or 20% bottom range for gold. Although I can’t speak in the name of Schiff I am certain that his constant bullishness on gold and negativity for the dollar is due to his admission that he can’t really predict any gold bottom range with any certainty. On the other hand however he is pretty certain that after deflation inevitably inflation is going to follow and prices of gold are going to go much higher in the end. In my opinion that is the real reason why Schiff is always bullish on gold : he feels he is unable to determine a low price for gold but that doesn’t matter very much to him since prices are going to go much higher eventually anyway. I think I am expressing his opinion correctly if I say that he thinks that it is better to buy gold now than missing the boat waiting for lower prices that possibly never ever are going to occur.

My Reply

As I said United, I trust my track record and my indicators.

ETF Research Trading Analysis 8-20-2015 Sign up link: https://buygoldandsilversafely.com/etf-research-trading-service/ 

Today we had another good day where this time every single ETF that was listed on the sheet that was green on the weekly was a positive today. This service you are subscribed to or thinking about subscribing to at least you see it beats throwing darts, lol. In all seriousness, trading with the trend works. We knew the Fed week was volatile and it was, and then a trend developed. While trends do change, just move your stops up so you don’t lose any profit. And feel free to take profit any time. If a major trend like with the indexes is in our favor now and you take profit, there will be trends in other ETFs that are waiting for you. It may be a day or so wait, but there is ALWAYS another trend coming we can play. 

SVXY I said yesterday has been weak and hasn’t been on the weakly but it’s interesting to note that it has been so good for so long that even with big down days like today it hasn’t triggered red on the monthly. Pretty incredible. UVXY is on the one to watch list. It hasn’t triggered green on the weekly yet. 

For all trades labeled today I would still throw out caution and see if there are quick reversals. We had a typical up and down or down and up day for many and if you see the ETF is in mid-range, it becomes a more difficult trade at present and I would be more cautious or trade with smaller shares still. While you see some familiar faces on the sheet that have turned green, remember they also turned red not too long ago. That said, the green color represents trend and you can’t ignore a trend. You just need to know a trend reverses and take profit and keep stops. 

GOLD MINING RELATED ANALYSIS

The dollar took another nose dive today and is flirting up and below the 96 mark now and this is where it will break down or bounce. The trend was established with the first turn of the weekly green on the mining ETFs. Only silver related ETFs reversed for a bit but are now green again. The move down in gold was so powerful that even with this nice bounce the ETFs that are inverse mining stocks and silver are still green on the monthly. I want to see them turn red to have full conviction for a longer, more sustained run in the long mining ETFs. Watch the 96 level for clues now. We broke through that 97 as our first signal and now we need to break the 96 to continue staying long the miners.

CHINA/RUSSIA

YANG once again gapped up well past the 105 mark and hit a high of 110.30 before closing at 109.97.  Yesterday I said the next stop could be the 114.70/115.70 mark hit in March. I would still look to this mark as resistance. YINN I would now be a buyer only on a move over 23.18 for a reversal play (they always come and can be scalped). Did you know that YANG, which has been on a nice run since 60 on June 10th, is still down 22% for the last calendar year?

RUSS I said that 63 is not out of the question and although it was volatile today, still finished higher by 30 cents. Market makers will try to buck you off the trend now and again. If you are up big on a trade you can ride it out or do what I love to do; take profit.

ENERGY

DWTI moved to only 6 points away from the 199 target at its high today but the volatility may have shaken some out of this trade which is ok. Yesterday I said a pullback can always come as it was at that time down 95 cents after hours. I said yesterday I would go long if you have not got in for a scalp on a break of 190.50 and it did break that price and you could have scalped 3 points. I also said you could trade UWTI on a break of 96 cents or 1 dollar if conservative. It broke .96, moved to .98, then fell to .91. Those who were conservative waiting for the 1.00 entry never got trapped like the risk takers.

I still think the dollar staying under 96 might get UWTI going. Would only trade a higher high in it tomorrow for a scalp.

ERY I said go long at the open and we are up 1.49 on it.

UGAZ got the report it needed and you might have caught that higher high. I have been saying that it was a good buy in the 1.77 to 1.85 range. Today it closed at 1.90.  I have put it on the to watch list.

INDEXES

See above.

EDZ got to surpassed the first target of 49.35 hitting a high of 50.15 and closed at 49.84. Great trade so far. As I said yesterday, still have the goal of hitting 55.48 and 59 before possibly reversing or consolidating for a further break out to 96 if we simply capitulate.

BIS is green again on the weekly and a buy at the open per the rules. It closed near its high.

VOLATILITY

UVXY is the story now, but I would still be a buyer of SVXY for a scalp on a reversal. UVXY is always a risky trade and you only need look at a long term chart to see that. It can change on you quickly. I would be a buyer over 31.85 for a risky, take profit quickly with a scalp play as it is on the one to watch list only and hasn’t triggered.

INTEREST RATES

TLT gapped up and went higher all day closing at 126.03 near the high of the day again. I have said many times this fits in with my outlook and see the 10 year at some point falling below 2%.