Gold: New 2017 High
Guest Post from Stefan Gleason, Originally Published on Money Metals Exchange
Gold’s naysayers and doubters came out in full force earlier this summer as sentiment reached its nadir. The mid-year pullback in prices did, too.
There can be no doubt about it now – gold has broken out of its summer doldrums. On Monday, the yellow metal finally broke through the longstanding $1,300/oz resistance zone to make a new high for the year at $1,316.
MD: Can you imagine how boring this would all be if we had “real” money? “There can be no doubt about it now — real money has broken out of it summer doldrums of 1.000 HULs. On Monday, the ideal media finally broke through the longstanding 1.000 HULs resistance zone to make a new high for the year … and the decade … and the century … at 1.000 HULS.
MD: “Assuming the breakout holds, the next upside target is 1.000 HULs, the high point for the millennium.
There are plenty of bullish factors behind gold’s recent upside momentum to continue pushing prices higher in the days and weeks ahead. The gold mining stocks are starting to show relative strength again. And the U.S. Dollar Index appears to have begun another new down leg this week, falling Monday to a two-and-a-half-year low.
MD: Now really. How can these twerps think gold is money?
Another bullish factor is geopolitics. Gold gained a few more dollars in early trading Tuesday morning in Asia after North Korea launched a missile over Japan. Japanese Prime Minister Shinzo Abe said, “Their outrageous act of firing a missile over our country is an unprecedented, serious and grave threat and greatly damages regional peace and security.”
MD: Real money is “never” affected by geopolitics … or any other kind of politics for that matter.
On any ordinary news day, this dangerous provocation from North Korea would be the top story on all the cable news channels. Hawks would be calling on the U.S. to retaliate, and doves would be warning of the potential for millions of deaths in the event war breaks out in the densely populated region.
For now, though, the unprecedented flooding caused by Hurricane Harvey is the Trump administration’s top priority. Early estimates are that the storm has caused $40 billion in damage. Water levels are still rising in Houston, and surrounding areas extending to Louisiana, so the scale of the catastrophic losses stemming from 11 trillion gallons of water will continue to grow in the days ahead.
MD: Real money is never affected by weather calamities … or earth shaking calamities … or run away fires. In fact, that’s when it really shines. Traders will create money (i.e. make trading promises spanning time and space) immediately and begin repairs and rebuilding. They will be unconstrained in creating this money. And they can make promises spanning 5 or 10 years with periodic payments to prove performance and maintain the negative feedback loop. Responsible traders will enjoy zero interest load. And all traders will enjoy zero inflation. Life is good.
Several major oil refineries have been shut down by the storm. However, crude oil production is little affected. Oil inventories are expected to build even as gasoline prices rise (gasoline futures jumped 3% on Monday).
MD: You really have to wonder about this reporting. They reported that the refineries would be shut down for as much as a month. And they reported they’re tapping the strategic oil reserve for crude oil. Now what in the world is that crude oil supposed to do without refineries?
The disaster is bringing Americans from disparate backgrounds and worldviews together, united in a common purpose to help provide relief to those in need. Perhaps Congress will set aside some of its partisan acrimony when it goes back into session next week. Unfortunately for taxpayers, though, outbreaks of bipartisanship are usually associated with emergencies that cause both sides to agree on even more spending.
MD: Somebody (this writer) needs to ask themselves “what is the purpose of congress?”
The political pressure to make sure federal agencies are equipped to handle Harvey relief efforts (which will be ongoing for months) figures to be overwhelming. Conservatives who had aimed to force concessions in an upcoming budget fight may conclude that they now have no leverage to do so.
MD: With real money, the agencies couldn’t do this. They couldn’t create the money to do it because they are deadbeats. They never return the money they create. But with real money the agencies wouldn’t be needed to do this in the first place.
President Donald Trump so far hasn’t backed off his vow to pursue border wall funding even if Congress refuses and a government shutdown occurs. But a government shutdown in the aftermath of a major natural disaster could be a political disaster for whoever gets blamed for it.
MD: The only thing bad about a government shutdown is that we continue to pay the government workers for overtly doing nothing rather than covertly doing nothing. A permanent government shutdown would be oh-so-refreshing.
With so many risks hitting investors this week, it’s no surprise that the gold market is benefiting from safe-haven inflows.
MD: Now reconcile that with your “gold is money” meme!
Silver is benefiting as well. Although the silver market has not yet hit a new high for the year, prices advanced nearly 2.5% Monday to close above the 200-day moving average.
If silver can now start showing leadership, that would be bullish for the entire precious metals complex. The gold:silver ratio currently stands at about 75:1. Gold is still trading at a high price historically relative to silver.
The ratio can move rapidly to the downside when silver prices are surging. That was the case from late 2010 to early 2011, when the ratio dropped from the high 60s to the low 30s. An even bigger move could be in store for those who buy silver now, while the gold:silver ratio is still in the 70s.
MD: I can just picture this writer sitting on the beach and giving us a play by play of the waves coming in. I wonder if he would even move to claiming the waves are money.
Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.
Thanks to: Stefan Gleason, Originally Published on Money Metals Exchange