CS. After Janet Yellen's testimony fundamental picture for Gold is very bright, QE is assured "until the economic data will justify the opposite". Even after The Taper, we will have the credit expansion in the monetary base ongoing and, maybe, velocity will increase finally with money flowing through financial system.
Question of Taper is still more than open - with Bernanke in office until Jan 31, 2014 we are very doubtful that he will make any decision on part of the FED. With Janet Yellen coming into the picture we can expect even more accommodation until economy will provide the clear signs of improvement in the real economic growth. The main take out for us from Janet Yellen's testimony is that "There Are No Bubbles And More To Be done."
In all normal circumstances Gold will be flying over $2000 long time ago, but we do not have the luxury of free markets with "The FED's 100-Year War Against Gold." Market can not be manipulated forever, particularly when underlining Demand is growing with the suppressed Gold price. China and other Asian countries are more than happy to accumulate cheap Gold and it is flowing from The West To The East at the disturbing record rate. COMEX is running on fumes now and LBMA banks are exposed to the Gold Bank Run with all-time-high leverage of 69 owners per ounce of deliverable Gold.
In all normal market circumstances the Gold chart above will provide a good formation for the higher prices with Bullish free white candles coming out from the very important support - which can confirm the higher low - and momentum indicators turned to the Upside. The reason for it is the US Dollar chart below withvery strong Bearish Reversal candle formed last week. Despite very weak data from Europe US Dollar was not able to overcome the reversal so far and its momentum indicators are turning Down. The follow up next week will be very important.
There are a lot of calls for Gold to go down to $1000 level and it could be another very good contrarian indicator. Basically all the events are confirming the ongoing US Dollar debasement case: reduced buying by foreigners of US Treasuries, record level of buying US Treasuries by the FED. Taper talk - which means less Bid from FED for USTs, less demand in the market and higher interest rates and Janet Yellen on the mission with More To Be Done. Debt Ceiling debate entertainment is coming back very soon and Raised Debt Ceiling Does Mean More Debt, whatever spin you would like to put on it.
Below we have another interesting confirmation of the Gold demand action printed on the Weekly chart.
We have three Higher Lows so far - after the infamous attack on Gold to break the $1550 support level in April - and the very strong bullish candle last week, forming the third low now. With the follow through with the higher Gold prices we need to make the weekly close above the level of previous high of $1450. You will be totally surprised how investment sentiment will turn on a dime with this kind of action.
Can the Gold be the victim of another Hit and Run accident in the DC area again? By all means, unfortunately, but COMEX numbers and Record Outflow of Physical Gold from The Western financial system makes it more and more difficult. LBMA needs to balance its books and at 69 leverage it is almost impossible at this level of Gold prices. Only higher Gold prices will provide more Gold supply and we are not even talking now about the long term damage to the Gold industry. Where the Gold will come in the future if Majors are cutting back their projects and Juniors are closing down any exploration and development?
Another very important input is coming from China this week after the conclusion of The Third Plenum. Details are still scarce, but what is coming out is nothing less than groundbreaking. China will relax its one child policy, abolish labor camps and will allow more private capital participation alongside with the state. Our take is that China is very serious now to build its internal market and will concentrate on the long term plan of the stimulating the transition to the Internal Growth oriented model. Walmart results are showing that FED QE wealth transfer policies can not make U.S. food stamps nation to prosper in any meaningful way and nobody can rely on it any more. What it means? Higher Yuan in the end and higher commodities prices in the dollar terms. That is why China is so active in securing the best available hard assets all over the world including Gold, Copper and Lithium.
Silver is the poor men's Gold and its action is following the Gold, but with much more leverage in the system. We have as well very strong candles printed last week's action with all the caveats we have discussed above.
Gold Bugs Index HUI is sitting on the higher Low so far after the Double Bottom reversal printed in July October Lows and is waiting for direction from Gold. We need here the weekly close above 250 level to bring the excitement back into the picture, after that you can be surprised again how fast the memories about the Dead Wood Gold Miners can fade away.
It was a good week for McEwen Mining and should our observations materialise for Gold and Silver in the positive direction next week this company is very well positioned for the upside. Huge short position can provide the fuel for the explosive upside move. TNR Gold is now depends on Rob McEwen Midas Touch and we like this company as we have discussed before. Read our full disclaimers always do you own DD and have a pleasant week ahead of us!
Brutal Past 24 Months For Precious Metals Investors, Nearing A Bottom – Rob McEwen MUX, TNR.v, GLD, GDX, SLV, CU
"Rob McEwen can not control Gold, Silver or Copper prices, but he can control the management of his company. McEwen Mining has delivered solid results in the very tough environment and shows very entrepreneurial approach to advance its business plan."
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