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Everyone wants to see my head on a silver platter. Or make it a gold platter. Why? Because they think I’ve completely missed the gold rally and if I don’t tell them to get on board now, they will forever have lost their chance to get in as gold ultimately works its way to over $5,000 an ounce.
Well, sorry everyone. Gold isn’t going to $5,000 an ounce tomorrow. So let’s get things straight about the gold market right now.
First things first. Gold has recently rallied up to its point of maximum resistance at the $1,306 level basis the June futures contract. While it did yield a minor buy signal last Friday, Monday’s almost perfect test of weekly and monthly overhead resistance at $1,306 so far continues to look like a major failure is being set up.
Moreover, it appears that gold and other precious metals are still poised to turn violently down. Here is my latest neural net chart of gold. As you can clearly see, the called-for April 29 high, which came exactly on cue, is indicating the model is still calling the shots.
So as of right now, all we have seen is a test of maximum weekly resistance at the $1,306 – $1,307 level.
Therefore, what we are facing is either:
A) A major collapse heading into late May, or …
B) A soon-to-be revealed “cycle inversion.”
If gold can start trading lower here and generate some intraday sell signals, then it will continue to follow the model into a late May low which could be even lower than I originally expected.
If, on the other hand, gold holds in this region and then closes above the $1,307 level, we will most likely see gold continue higher into late June or even mid-July reaching as high as the $1,450 level.
If you are a long-term bull on gold, you do not want to see that happen. The most bullish pattern for gold to form now is to pull back on time into a late May low and then begin its next rally.
If gold instead inverts and produces a June/July high between $1,400 and $1,450, then the second half of the year for gold will be absolutely devastating. Ditto for mining shares.
Let’s pause for a moment and think about what is really driving gold. It’s not inflation. There is none to be seen virtually anywhere on the globe. It is not outrageous demand from central banks as so many seem to be touting now as all my sources indicate that central bank purchases of gold are muted at this time.
In my opinion, what is driving this rally from a fundamental point of view is what I have been telling you all along, the main force that will be responsible for gold’s new long-term bull market.
That force is the rising tide of the cycles of war and geopolitical instability and discontent rising all over the world. Europe we know is a basket case — its economy is in the gutter. Its leadership is totally lacking.
In the Middle East, the region is in its worst shape ever, both economically speaking and ethnically speaking. Saudi Arabia is in financial straits. ISIS has rolled over the entire Middle East. Sunnis and Shiites are at each other’s throats. ISIS is expanding into Europe and Western Africa.
Further north, Russia is clearly claiming the Baltic region with its latest maneuvering of the MIG barrel rolls within 25 feet of U.S. aircraft.
And then there’s China clearly taking control of the South China Sea, standing squarely against not just Vietnam, Cambodia, Malaysia, Brunei, and the Philippines but also the United States of America.
Right here at home in the U.S., we have perhaps the most divisive nasty political primary process seen in the history of this country.
This is, as I warned a long time ago, the single major force that is going to drive gold’s new bull market, ultimately taking it to over $5,000 an ounce by 2020. I have no doubt about it.
But that does not mean that gold and other precious metals are going to go straight up. And if you think that way, I guarantee you that you will lose your shirt. Buying the wrong rallies, and selling into the lows.
You must remain focused and disciplined. That means sticking with the neural net models and the two alternative forecasts that are available at this time. The top alternative is that gold and the other precious metals remain on track for a sharp decline into the end of May.
The second alternative — lower probability — is a cycle inversion as noted previously that could take gold up into the mid-$1,400 level before a much more prolonged and probably steeper correction begins.
Stay tuned and best wishes,
Larry
