A Timeline For The Next Rally In Gold

47
Thu, Jul 21, 2016 - 11:27am

We've been watching for two weeks as prices have once again been pushed backward into expirations. However, the pattern calls for a renewed up trend to begin as soon as next week. Is it possible to connect the dots and project that far out? Yes!

As we've been following for the past two weeks, the USDJPY has now rallied seven points or 7% in just eight days as Krazy Kuroda in Japan has promised to buy 1T yen worth of new government debt and perhaps even begin the "helicopter money" plan of direct government debt monetization going forward.

The correlation between the yen and gold has been present for years and we have monitored it closely since 2014. As a reminder, here's how it looks in 2016:

This unexpected rally in the USDJPY (the inverse of the yen shown above) has conveniently helped the market-making Bullion Banks to manage their positions into the front-and-delivery month August gold expirations next week. Here's the calendar:

Tuesday, July 26 - August gold option expiration

Thursday, July 28 - August gold contract "expiration" as it goes "off the board"

Friday, July 29 - August gold First Notice Day as August gold trades only with 100% margin and in its "delivery" phase

Previously in 2016, there's a clear pattern of price management and selloffs as front-and-delivery month contracts moved toward expiration. As you can see below, the latter stages of March (ahead of April) and May (ahead of June) saw declines similar to what are seeing now:

But more importantly, look at the price action while "deliveries" were taking place this year. During the calendar months of February, April and June, gold has soared anywhere from 7% to 12%! Could August be setting up for a similar move? Yes!

And what, besides the end of the August expirations next week could prompt such a turnaround? Most likely, another change in sentiment and trend in the USDJPY. And what might cause that shift? Two events that will occur within 36 hours of each other next Wednesday and Friday:

Wednesday, July 27 - FOMC meeting ends with "Fedlines" announced at 2:00 pm EDT. No rate changes!

Friday, July 29 - The Bank of Japan meets and releases its latest QE plans. However, with the USDJPY already having moved over 7% ahead of this "news", this sets up as a classic "buy-the-rumor, sell-the-news" event. The thought here is that the USDJPY then will resume its downtrend in early August. See link here: https://www.reuters.com/article/us-boj-markets-idUSKCN10032J

And the USDJPY has already reached a major point of resistance on its chart. This, too, hints at a turnaround soon and continuation of the downtrend:

So, if we're looking at a reversal and continuation of gold's 2016 uptrend in August, how far might the next leg up take price. For an answer, we're going to consult another chart.

Back in February, we started following an important breakout on gold's weekly chart. The chart below is from Friday, March 7 and shows gold finally breaking out from its nearly 3-year downtrend:

What happened next? Well, as noted above, March was an "expiration" month for the April Comex contract AND, even more importantly, a breakout of this 3-year trend was something that The Banks wanted to avoid. By the end of the month, the chart looked like this:

Eventually, though, the falling USDJPY and the surging amount of global debt with negative interest rates served to drive gold even higher. By the middle of June, it became clear that The Banks were going to lose this fight. The Brexit vote that followed only served to seal their fate:

The last remaining line of defense for The Banks and their maintenance of a downtrend in gold was violated with the weekly close back on Friday, July 8. (Again, what an interesting coincidence that Kuroda's unexpected announcements came before trading resumed the following Monday, July 11.) Here's a chart we posted with that day's podcast review:

As you can see, it should have been clear to any objective observer that gold had bottomed and a renewed bull market had begun. That The Banks have used the USDJPY strength and the Spec liquidation surrounding August contract expirations to their advantage should, therefore, come as no surprise. They are attempting the same block-and-stall routine that they put on gold back in March when it broke out of its 3-year down channel. Therefore, expect the same fight now. Though we should expect price improvement and a renewed rally in August, do not be surprised if it takes until October for gold to really get cooking to new highs. Again, the March to May action around the earlier breakout is your guide.

So, summing up, what should we expect going forward:

  • Further choppy to downward price action into late next week. It's still possible that gold could trade as low as $1285 and back near its 50-day moving average before bottoming. This area has proven as support all year.
  • A renewed rally in August back to near, but likely not exceeding much, the highs of late June and early July. Something between $1370 and $1390. Talk will begin to spread that gold has seen a "double top".
  • Another tumble in mid-late September as the next front and delivery month (October) comes off the board, However, October is never a big volume or big "delivery" month. Instead, most of the action after August typically shifts into the December contract. Therefore, following the 2016 pattern, any dropoff in September should be more shallow than what we're seeing at present.
  • Then, finally, a breakout to new 2016 highs in October and November. This year-end rally should take gold all the way back to near the April 2013 manipulated breakdown level of $1525. Let's call it $1475-$1525.

So there you go. That's what we expect. If I'm proven correct, I'll gladly take all the adulation that comes this way. If we're wrong...well, I'm not eating my hat again. That almost killed me last time.

Have a great day,

TF

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  47 Comments

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tyberious
Jul 21, 2016 - 10:34pm

Craig

You, without question provide some of the BEST PM manipulation analysis available, bar none!

But readers here at Turdville can add significantly to their knowledge by follow Dave's blog, which I know you do and endorse. He posted these two items which, I feel affect our money significantly.

1. They’re Making It Easier To Buy Gold Cheap

As you know USG/FED always jawbone the PMs lower at significant trading points and prior to first notices. So to help PMs along and back into the contrived trading channel, the Burnake said Kuroda will print $100B, for Kuroda to turn around and say nope!

2. Japan Is Signalling The End-Game For The U.S.

"This leads us to Japan. Curiously, Japan announced announced last week that its TOCOM commodity exchange (Japan’s less corrupted CME-equivalent) would begin trading physical gold – like the Shanghai Gold Exchange – on July 25th – TOCOM Physical Gold. It also announced that it would be introducing a delivery-at-settlement option for its current-month gold futures contract. That is, TOCOM gold futures buyers will now have the ability to take delivery of physical gold via TOCOM’s paper gold."

Now, readers may know that I'm a conspiracy fact researcher, so let me elucidate just a little.

The last 8 years, some say 16, some might say 50, of US policy failures including attempted coup in Brazil and Turkey, loss of Philippines, inability to create a war with Russia, in addition to SCO, BRICS, AIIB and the other failures of the NWO/One Bank/US Dollar hegemon, have let to a critical mass is close to being reached, with the understating among Asian countries aka The Producers is that the UST/USD is a doomed currency. Japan is fully aware that they will be attacked in some way if the don't cooperate, 4/11/11 anyone, so they agree to 100$B knowing it wont happen.

If Japan, occupied for 70 years, is working with Russia, China and if this Turkey coup was indeed provided info by Russia then my spidey senses are on full alert!

Jul 21, 2016 - 9:46pm

Pretty remarkable to watch

Pretty remarkable to watch the battle in silver at present. The bid keeps attacking the offer at precisely $20. But the offer is almost endless and price keeps getting forced back.

trx16
Jul 21, 2016 - 9:44pm

Contrarian Indicator

CNBS :Goldman Nut Sachs is advising there clients to short copper. Positive Signal for Turdites.

Jul 21, 2016 - 9:07pm

Post the China open

Silver just tapped $20.

Swineflogger
Jul 21, 2016 - 8:14pm

Just for shits and giggles

For any new or overly sensitive turdites PIAPS stands for:

Pig

In

A

Pants

Suit

That is all

benque
Jul 21, 2016 - 7:17pm

The potato sack

Hey Dirt, that's not the potato sack, that's the potato with the potato blight wearing the potato sack. Unblighted potatoes have fled that sack.

And for any of you who might be interested, I do NOT want to know if she has a sister. Only a slick willy could ever be THAT desperate.

Angry Chef
Jul 21, 2016 - 4:42pm

This situation in Turkey is

This situation in Turkey is starting to get very very interesting. Now couple this with the recent BREXIT, where I surmmised that the City of London had made the decision to turn East towards China and the Eurasian Trade zone. Afterall, did we really think the London Banksters were going to miss out on all those Yuan denominated Bonds for building out the Eurasian Trade Zone infrastructure ? And if I'm reading between the lines correctly this move by Turkey towards Russia/Iran/Syria would potentially spell the end of Saudi Arabia as we know it and fortify Russia's Southern flank for any possible attack on Crimea. Which would allow for Russia's potent military to annihilate NATO forces on the ground in the Baltic States. Which of course would eventually end the rign, as we've known here in Turdville for some time, of the petrodollar and quite possibly the end of the Keynesian Monetary System as we know it.

Lets keep an eye on the House of Saud over the next little while. Me thinks that it may be the next domino to fall

My, my, my we live in interesting times do we not my friends ?

Erdogan’s Pivot to Russia & Syria Caused Military Coup with Foreign Directive |Russian Intel | Covert Geopolitics

The Coup in Turkey has Thrown a Wrench in Uncle Sam’s “Pivot” Plan : Information Clearing House - ICH

infometron
Jul 21, 2016 - 4:34pm

@Island Teal

We totally agree with PF, but we can agree to disagree... Mickelson (shooting 65) certainly didn't choke, rather, Stenson (shooting a stunning 63!), won ;^)

2015 was incredibly painful for el tigre, no doubt :^))

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Island Tealinfometron
Jul 21, 2016 - 4:28pm

@ infometron

Thanks re PF !!!

I used "choke" only because he lost. Nothing more.

Still think El Tigre at 2015 US Open was classic to watch.

tyberious
Jul 21, 2016 - 4:24pm

"Naturally, any sane society

"Naturally, any sane society would immediately declassify marijuana as a Schedule 1 drug. Unfortunately, we do not live in a sane society."

https://www.zerohedge.com/news/2016-07-21/real-reason-pharma-companies-h...

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