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The Merchant Weekend Report | 21st May 2017

The Merchant Weekend Report | 21st May 2017

The Patron’s Birthday this weekend 😉 Just saying…

 

What’s happening everyone? Hope you’re doing well and that the market has not enslaved you but rather that you are confident in your trading and vision for your future.

 

I have made some adjustments to my lifestyle and thought process lately but that’s for another post, another time.

 

Let’s talk markets…

 

Gold

Of prime interest to me at this time since I am 100% loaded into the precious metal.

Way undervalued at this stage:

Gold, when taking into account the money supply, is valued at $2,687 USD per ounce.

However, we can stand at the rooftop shouting that as much as we want, demand and supply of paper gold is the short term determining factor of this underrated and arguably, the only store of wealth and value.

While we’re in a supply and demand channel which is upward trending, there is some weakness in U.S Dollar terms. The true support is around $1196 USD:

 

U.S Gold Price

In Australian pricing, gold has found its way back into a higher channel, with current support at $1638 AUD:

Australian Gold Chart

 

As a bonus, Canadian Gold price, with support being at $1650 CAD and resistance being $1750 CAD:

CANADIAN gold chart

 

During the past few weeks we have seen a see-saw of market knee-jerk reactions. It’s all much of a muchness honestly. Unless you’re cashing in on every spike and buying in low again, it is fairly irrelevant to the overall gold picture.
What’s the overall picture/ Merchant’s view on Gold?

Up. Up and Up…even if we get pull backs etc, I believe the global economy is evolving rapidly into an inflationary trap.

The recent Australian budget for instance, is a disaster economically speaking, in terms of debt control etc. However, from a gold perspective, it’s brilliant.  Essentially the government appears to pretend that they are concerned with the deficit, however, in reality, their policies show that there is ZERO intention of returning to a budget surplus. This is one of many steps toward a completely fake and imaginary economy. What it means, is that they are pursuing a Keynesian model of spending money that doesn’t exist. That money filters into the economy and gets the ball rolling again, or so they hope. While there is a stimulus effect, the government is essentially reducing their currency to be more and more worthless (oxymoron?). That means that if Citizen Joe Soap has savings, he quickly should convert his savings into something that stores wealth, such as precious metals, art etc… Savings will be reduced to ashes in the longer run and superannuation is amongst the list of casualties (although it’s among the longest running jokes of our time.)

It appears that most Western governments are quite committed to printing and inflating their monetary supply while attempting to keep the lid on precious metals and commodities. I would place PM’s in a separate category however, as the demand side of commodities appears to be grinding to a major halt, while the demand for precious metals is increasing in non-western countries such as Russian, China and India.

 

Let’s just say, I need to brush up on my Mandarin if I wish to be relevant a decade or two from now.

 

As a patron of the Chamber you should know that the USDJPY is tightly correlated with precious metals… So how does that look?

USDJPY

Honestly, while it appears the bounce is in for the USDJPY which should result in a lower gold price, from the chart it looks weak in the knees which indicates to me that a stronger Yen and higher gold price are likely:

 

Yen USD Chart

Short term:

There are a few things that we all need to remain acutely aware of:

  1. The political boos for gold is super-temporary. Don’t celebrate any of it as it gets corrected almost instantaneously. Having said that, any surprise such as a bombing, missile strike, scandal etc is a selling opportunity for gold. That’s not my current strategy. Not interested: I have a life and am getting onto some good things so I don’t wish to do short term trades. You can, however, do as you please.
  2. The Trump trade may be unravelling exponentially, meaning all the feel good ideas of tax breaks, stimulus etc could be off the table, which means that the market may head for a correction.
  3. There is a disparity between the hard data (inflation, productivity, GDP) and the predictive models used by the government. It’s a matter of fantasy vs reality. Full time jobs are evaporating, wealth is depleting and productivity us almost at a stand still – however the market still believes the narrative that is is “transitory”… All numbers point to the trend that it’s not transitory. Hence, QE4 is closer than expected. In addition, that would be the reason why Western governments need to continue spending money that they don’t have: they need to inflate the money supply so as to keep in the exchange rates in check with the USA who is close to launching more stimulus. Make sense?
  4. The U.S Dollar appears to be bucking its bull run. This is good for gold overall.
  5. I expect that we are months away from some excuse to print money to try and stimulate the U.S, U.K, Australia etc… Stay tuned for whatever that may be. (War? Humanitarian Aid? Who knows… but it will come under the guise of a necessity to spend non existing funds.)
  6. In terms of Precious Miners… the funds are a bit broken right now…which is causing frustration in those sectors. I am not bothered by this. I am satisfied with the outlook of all my miners  (BLK you better reduce that AISC!) lol (Well spotted Celeste.)

(P.S US Dollar chart below…it’s due for a bounce…but if it doesn’t bounce…expect major moves in gold. Additionally, even if it bounces, it appears to be weak enough to present a possible further fall which would result in higher USD gold and U.S miners catching a bid. In fact the U.S Dollar is at a 6 month low(roughy).

 

DXY U.S Dollar

That’s it for now…I don’t want to overdo it.

 

I’ve enjoyed sharing these thoughts with you.

 

Think Better. Relax. Make Some Good Decisions in all aspects of your life.

 

|the Merchant

Merchant Weekend Report

 

 

 

 

 

 

 

11 Comments

  1. Anonymous

    It was my birthday too

    Reply
  2. thespeculator01

    Whoa your back! Welcome back to the world. Looking forward to more posts.

    Reply
  3. TJ

    A happy birthday to the Patron!
    Good to see you back Jack…

    Reply
  4. Boudicca

    Thx Jack for another well present insight into Gold. From each of your reports I get a ‘nugget’ of information which I either incorporate into my plan or modify my plan accordingly. I’ve come to the realization that having a dynamic plan rather than static master plan will allow flexibility as circumstances change. Looking forward to hearing about the lifestyle changes in a future report.

    Reply
  5. Celeste

    What? I got a mention? Might be a temporary lift tomorrow again with North Korean breaking news of yet another missile test. Good to see an update! Thanks. 🙂

    Reply
  6. Matthew Butler

    Interesting. Yes it’s that USD chart that’s giving me pause s’all before committing.

    Reply
    • the Merchant

      On an individual Australian mining stock basis it may be a great opportunity now. In terms of trading gold direct there may yet be some downside.

      Reply

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