Daily Archives: January 2, 2018

Gold Rocket Rally Update

10 charts that show why gold is undervalued right now | MINING.com

It’s amazing that analysts have just figured out that gold is undervalued, when the gold price is pointing up.They sure didn’t come up with any undervalue charts when gold was at $1125. Matter of fact, they were downright bearish when gold hit a bottom in December of 2016. They were dumping gold for Bitcoins was the main theme at that time. Who needs that ancient relic in our portfolios,when stocks are still going up?

Gold bullion should always be part of any holdings, but we should never buy gold when it is pointing up. Buying high destroys any cost averaging advantage and most of all it defeats any protection that gold offers against inflation. In 1999 gold investors also ignored gold as a hedge against inflation, but they sure loved gold as an inflation hedge when the gold price touched $1920.  Emotional investors have not changed one bit as they still love to buy high and then sell low in disgust when gold heads back down.

The short story is that the majority always does the wrong things at the wrong times, just like they are doing now. Due to this rapid rise, I think gold needs to correct, but picking correction bottoms usually doesn’t work, due to the fact we could be on another diagonal run.  We could get a very fast reaction, after which the bullish trend will just return and carry on.

Maybe the gold’s rise is all about the rise in the minimum wages this year? They are calling a $15 per hour a living wage, which only a few states are trying to implement. In my province, we are at about a $10.50 CAD minimum wage. This works out to about, a USD (.25) gold gram per hour, or two gold grams per 8hr day. ($84) per day.

Increase in wages does translate into more inflation down the road, but in my working days we got 20% pay raises per year for 4 years in a row. That really kicked in the inflation in the mid 70’s, but our wage increases couldn’t keep up with the rate of inflation. Eventually the middle class got wiped out during the 80’s and wages stagnated. In 2-3 years’ time, when gold touches $1600 US,  you would have to earn $200 per day just to keep up with inflation.

When the gold price shoots up, but the wages refuse to follow, then we are always falling behind in the rate of inflation. Having gold assets mitigates this effect when money becomes worth less in our future.

US Dollar Crash Update

Media attention about the crashing US dollar has started to gather attention, when the US dollar spiked to the downside. How much short term downside, there is still to come, is unknown, but the bigger bearish trend is still clear. The US dollar is in a much bigger bear market than what anyone expects to happen at this time. The US dollar will not turn on some mythical price bottom and carry on to new record highs, as  it takes much more than just price to stop any trend.

Sure, short term bullish moves will happen, but not until the entire world hates the US dollar and loves gold, can the US dollar be ready for another new bull market. Yes, we may have some problems figuring out this potential wave 1-2 in Minor degree, as we still have a small window for the US dollar to turn north and produce a “C” wave bullish run.

Also the commercial traders  are back to being net short, but they are starting to add to their long positions. Short term, that may produce a US dollar rally, and slow gold down a bit as well.

The US dollar can backfire and turn into a “C” wave bullish phase. If and when that happens, then we know the top trend line will get sliced in two. The trend line that touches more peaks or dips is the main trend line, and bigger degree levels will wander far outside this trend line.

Maybe raising of the minimum wage this year is causing the US dollar to crash, and not some secret evil currency manipulators.