Gold Approaches $5,000 as Thomson Cites Debt, Oil and Miner Strength

Stewart Thomson

Western mainstream media's narrative on gold is, in Thomson's view, on life support. He says the story being told is that massive debt does not matter, another bungled war does not matter, and a collapsing SPR does not matter.

The SPR, or Strategic Petroleum Reserve, is the United States' emergency crude oil stockpile, maintained by the Department of Energy for supply disruptions. Its levels have drawn political and market scrutiny after successive releases in recent years.

According to Thomson, the only thing that supposedly matters for gold is whether the Fed may raise rates by a quarter point, a move he describes as deeply negative for the metal. He says that narrative has frightened and discouraged amateur gold investors and leveraged funds, leading them to sell gold, silver and miners into the recent $4100-$3900 buy zone lows.

Oil surged $4/BBL yesterday, and gold also advanced. Thomson points to a bull wedge breakout in oil and a substantial base pattern in gold. Gold's traditional role as a hedge against inflation and geopolitical instability has historically drawn inflows during periods of rising energy prices and military conflict.

He says the US government is running low on debt-funded missile interceptors for its war in Iran, while stock market investors are repeatedly told that a market-supportive “deal” is imminent and that US forces are in “total control” of Hormuz. The Strait of Hormuz is one of the world's most critical oil transit chokepoints, through which roughly a fifth of global petroleum consumption normally passes. Thomson asks that if control is total, why tanker transits remain near zero and why gold is starting to rise alongside oil.

He also refers to the SPR as a “chart of horror” and argues that the debt problem is real, while the oil shortage cannot be fixed with rate hikes or deals. In his view, it is taking much longer than officials expected to build thousands of new missile interceptors and load them onto Navy ships.

Thomson concludes that investors should ignore the Western media narrative and be heavily invested in gold.

On the daily chart, he says gold has reached both horizontal and trendline resistance in the $4400 zone, while stochastics is becoming overbought. Stochastics is a momentum oscillator that compares a security's closing price to its price range over a set period, commonly used to identify potential reversal points. He notes that CPI and PPI inflation reports are due tomorrow and Thursday. He adds that many gold stocks are up 20%-50% from his key buy zone at $4100-$3900, and says it is time to book partial profits while holding core positions firmly.

On the weekly chart, Thomson highlights the 14,5,5 stochastics oscillator, which he describes as arguably the most important technical indicator for gold. He says there is still room for stochastics to rise along with price, and that the target zone of the short-term base pattern is the major resistance area at $4900-$5000. He says silver bullion and mining-stock investors who bought in the $4100-$3900 zone can also plan to take more profits there.

Thomson adds that while silver and miners can be traded for fiat profits, gold is the world's greatest currency. He says selling gold for fiat is an act of madness unless there is a dire emergency.

He then points to the CDNX line chart, saying a massive bull wedge is in play and that MACD (20,40,10 series) suggests an imminent breakout. The CDNX refers to the S&P/TSX Venture Composite Index, which tracks small-cap and junior companies, with a significant weighting in mining and energy exploration firms. Investors who acted in his previous buy zones, including the latest one at CDNX 850/gold $4000, are in good shape, he says. Thomson notes that junior mine stock investing is not for everyone, especially with size, but argues that these miners appear set to outperform as the gold bull market continues.

Turning to the GDX ETF, Thomson says it has surged about 28% in just a few weeks. GDX is the VanEck Gold Miners ETF, the largest exchange-traded fund tracking major gold and silver mining companies. He says stochastics and RSI are now both overbought, so partial profits can be taken on positions bought into the lows.

On the weekly chart, he says the senior miners still have a lot of room to run. Stochastics has moved out of oversold territory, is flashing a crossover buy signal, and MACD histograms are rising.

Thomson says that if inflation rises slightly after the CPI and/or PPI reports, Western media will revive its gold-rates narrative. He adds that any dip in the metals market this week caused by such commentary is likely to be short-lived.

Have a golden day.

Thanks.

Cheers,

St

About the author

Stewart Thomson

Stewart Thomson is a retired Merrill Lynch broker. He writes Graceland Updates daily between 4 a.m. and 7 a.m., and the newsletters are sent out around 8 a.m. to 9 a.m. The newsletter is attractively priced and uses a unique numbered point-form format designed to provide clarity and save reading time.

Risks, Disclaimers, Legal

Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualified investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line: Are You Prepared?

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