A Timeline For The Next Rally In Gold

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,



About the Author

turd [at] tfmetalsreport [dot] com ()


UulaBear · Jul 21, 2016 - 11:35am


For the Gold

I'm unable to click on the second to last chart... the Gold Daily. 

madams777 · Jul 21, 2016 - 11:39am


And just because...

RickshawETF · Jul 21, 2016 - 11:45am



Swineflogger · Jul 21, 2016 - 11:49am



EDIT: Had to strike quickly to beat the Marchanator! It's yours in perpetuity anyway Big M 

rxman · Jul 21, 2016 - 11:50am


In that pic above is that Cruz wife or sister?


murphy · Jul 21, 2016 - 11:53am

@ Rickshaw

Don't you mean Terd?


SteveW · Jul 21, 2016 - 11:53am

Helicopter money

not an option according to BOJ. Yen strengthens and USD/JPY falls to currently 106.03.

Has to help gold and stifle the bankers.

Oh, 6th.

Angry Chef · Jul 21, 2016 - 12:00pm

Pic Above

Actually it's Ted Cruz in drag....

RickshawETF · Jul 21, 2016 - 12:01pm


Or, as they say in Sweden:


RickshawETF · Jul 21, 2016 - 12:11pm


What's up with K92 Mining ?

It's up over 18% in just the past hour . . .

Angry Chef · Jul 21, 2016 - 12:12pm

Held Hostage At Incirlik

Whoa ! You have to ask yourselves why this situation isn't on the front page of every news outlet and why isn't everyone speaking about it ? Not saying she's is 100% correct but it sure provides for some speculation. Good read.

Held Hostage at Incirlik — Rogue Money

Swineflogger · Jul 21, 2016 - 12:16pm

Go Armani!

I'm not posting this to blast Hillary for giving a speech about income inequality while wearing a $12,000 Armani jacket.

I’m posting this to give KUDOS to Armani for being able to sell a potato sack with sleeves for $12,000!

· Jul 21, 2016 - 12:20pm


Watch USDJPY Negative interest rates - no way, no how NIRP introduced "no need and no possibility for helicopter money," Rotor blades start whirring JPY strengthens Takes nosedive JPY strengthens ...?

Goldencross · Jul 21, 2016 - 12:30pm

K92 Mining

Up 24% today! Thanks Turd! Wow great tip and interview with these Guy's. K92 start's production this August!

SteveW · Jul 21, 2016 - 12:47pm


Featured on BNN this morning. Maybe that caused a spike?


SteveW · Jul 21, 2016 - 1:03pm

Armani jacket

Maybe it just looks like a potato sack on that clothes horse!

· Jul 21, 2016 - 1:09pm

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Swift Boat Vet · Jul 21, 2016 - 1:33pm

Hey Turdski

Maybe I missed it, but do you think our interest rates break below 1% or even approach zero ?

Oh! and don't forget the old Chinese saying:

Thanks Turd,


silver10sguy · Jul 21, 2016 - 1:47pm

Meadow Bay Gold Corp Up 30% Today

Back in December 2014 Paramount Gold was sold to Coeur Mining. The CEO of Paramount Gold said he was too young to retire and is now head of Meadow Bay Gold Corp with assets in Nevada. With his experience I decided to check out his exploration play. It was once owned by bigger companies in the past but got sold off during hard times. MAYGF is worth a look with assets in the ground. Years ago it was $1.50 in 2011 and bottomed hopefully early this year at 4 cents. The CEO of Meadow Bay Gold Corp is Christopher Crupi. He is the largest shareholder in MAYGF which caught my attention.

murphy · Jul 21, 2016 - 1:48pm


But the debt problem is most acute in Japan, obviously, where debt to GDP is now about 240%. Japan was insolvent at a debt-to-GDP ratio of 120%, so the rest is just gravy.

Oddly, interest rates across the curve are negative, so it’s not like anyone worries about default. Interest rates might be positive and quite large if the BOJ hadn’t bought up a majority of bonds and created a scarcity of duration. So now most of Japan’s external debt is actually owed to the BOJ and is not external at all.

What if the Ministry of Finance simply defaults to the BOJ? Does a tree make a sound if it falls in the forest?

This is in fact being seriously considered. Basically, it has been suggested that the government swap out all those bonds for one giant perpetual zero-coupon bond (i.e., no maturity), which is effectively the same as canceling it out.

So Japan goes from 240% debt to GDP to 40% debt to GDP, and guess what? Then they can go back to building roads and trains and bridges to nowhere, like they were in the ‘90s.

Like I said, this is being discussed seriously. The actual cancelation of debt. Think about it: back when we started doing QE, people were freaking out about what would happen when the Fed sold bonds back into the market. That was never going to happen—that was never the intent at all.

Japan is not the only country in checkmate. Italy is also stuck, as is most of Europe. And we will be someday, too. If Japan cancels the debt, it will set a very important precedent. It will also disincentivize people from ever buying government bonds again in the future.

Meanwhile, Back at the Ranch

So after messing around with monetary policy for the last eight years, central banks and policymakers are not pleased with the product of their effort. Developed economies are still mostly poo, labor markets are a mess, and nobody is happy.

Enter Keynesian stimulus. Governments globally would love nothing more than to crank up the spending machine and start building roads and trains and bridges to nowhere. We hadn’t done this in the past because… well, we couldn’t afford it. We can’t now, but if we could just make all this debt go “poof,” we could afford anything.

The obvious trade here is gold. Let me explain why.

Most people think hyperinflation happens like this:

You print the money
You build the bridge

But in reality, it will happen like this:

You borrow the money
You build the bridge
You print the money
You buy the bonds back
You cancel the bonds

Voila—now you have the bridge and you have the money, just like in the first example, except through a complex series of steps, so you don’t actually look like a hyperinflationary banana republic.

I bet that either Hillary Clinton or Donald Trump, in the homestretch of the campaign, will be making very extravagant promises about infrastructure spending. You heard it here first.

Rocket Fuel

So if debt doesn’t matter and we’re going to build roads and trains and bridges to nowhere, it means that shorting this market is a huge waste of time.

It will end badly someday, but keep in mind that people have been predicting disaster for the last 45 years, when Nixon took us off gold. We could have 15 more years of this crap.

What is the alternative? Austerity, of course. Austerity sounds so depressing, though. Austerity is really just a very derogatory term for fiscal discipline. We live in a freaking fantasyland, where anything goes. Similar sentiments were expressed in Weimar Germany. The party is just getting started.


OOOBuck · Jul 21, 2016 - 1:48pm

Turd - you are either

very brave, very foolish or very confident. 2 out of 3 makes all the difference in a PUBLIC POST.

I sure do hope you're right.

Island Teal · Jul 21, 2016 - 1:51pm

Just Because

Enjoy !!!!

David Gilmour & David Bowie - Comfortably Numb
Swineflogger · Jul 21, 2016 - 1:52pm

OT: What summer means to me in 7 words or less

 photo whatsummermeanstome_zpsxjcwvoig.jpg

Homegrown organic pineapple tomatoes with basil pesto

OOOBuck · Jul 21, 2016 - 1:54pm

I owe my "career" to having

I owe my "career" to having the ability and fortitude to publish posts like this. Many here will recall "Turd's Bottom" back in January of 2011 as one of the things that really got things rolling.

My job is to tell you what I think...win or lose. No one like panty-wastes, like The Wizard of Hindsight, who go out of their way to avoid making predictions in order to maintain "credibility".

Swineflogger · Jul 21, 2016 - 1:56pm
Dirt_Reynolds Swineflogger · Jul 21, 2016 - 2:01pm

How much

for the jacket the potato sack is wearing?

OOOBuck · Jul 21, 2016 - 2:02pm

Way to go Turd - I admire that

and depend on it a lot! Yours are definitely many times larger than OOO.

brokerk22 · Jul 21, 2016 - 2:12pm


That forecast is very bearish IMO. That assumes they dont lose control which I would bet heavily on way before the end of the year. $1525 what a joke! It will be much higher when they lose control. My bet is they do and before the election.

OOOBuck · Jul 21, 2016 - 2:23pm

Avino still laboring

under the simple headlines of a few days ago and without regard to the remainder of the story.
The reason for reduced production in the last quarter has either been ignored or someone is questioning the accuracy of the report. I'm betting on the former.

Angry Chef · Jul 21, 2016 - 2:24pm

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