February 7, 2018
Back on January 18, we wrote a post predicting that another pullback in gold prices was on the horizon. Here’s the link: Gold slam imminent
In that post, we projected this latest price swoon based upon the experience of watching net positions expand and contract on the COMEX. The chart below was drawn up that day, but we’ve added the most recent peak, which came a week later:
Just as in 2016 and 2017, 2018 began with a 10% rally off of a December FOMC rate hike. And just as in 2016 and 2017, we are now in a period of consolidation:
In 2016, COMEX gold moved sideways to gradually higher from February to June. Last year, the same pattern played out from February to July. Will we see a repeat in 2018? Probably—but not identical. Instead, expect the pullbacks to be shallower and the peaks marginally higher. The dominant chart is still the weekly one with the big smiley face or bowl. Here it is again for your viewing pleasure:
Obviously, the symmetry is impressive. But it doesn’t show a breakout coming until July or August. So, as in 2017, we must expect a series of highs and lows—CoT buildups and CoT washes—until a breakout finally comes this summer.
Until then, expect the dollar to remain generally weak with a range-bound USDJPY, too. Maybe we’ll be wrong about this part, but why would we reasonably expect much else?
• Political Risk : Will the Democrats take control of Congress in the November elections, and how soon would they move to impeach Trump in 2019? Regardless, with this election pending, the battles over spending, immigration and debt will only intensify.
• Geo-Political Risk : Hostilities increasing in North Korea, the Middle East and Ukraine.
• De-Dollarization Risk : Somewhat a part of geo-political risk, but this also includes the CNY-Crude and other developments.
How do you manage all of this on a day-to-day basis? With patience.
Look, we’ve all been beaten to death for five years and NO ONE wants this to end quicker than I, but patience is more important now than ever before, in a “darkest before dawn” sort of way. If we get chased out now, we’ll miss the explosive beginnings of the move, and, from there, we’ll be playing catch up the rest of the way. It’s like the miners in early 2016. If you weren’t in at HUI 100, then you doubted and doubted and barely profited on the way up to HUI 280.
So, in the end, let The Banks do what they do and try to not let it get you down. Prices will move higher again soon enough as this process plays out. In particular, COMEX silver is likely close to being washed out already and is unlikely to fall much farther. Maybe $16.00-$16.20, but that should be about it, and then another tradable move toward $18 would be right around the corner.
By late this year, the plan is for COMEX gold to be north of $1400 and using that level as support for a springboard toward $1525. COMEX silver will be near $20 and ready to tackle $22 in early 2019.
And from there, a very interesting 2019 awaits.
Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities. Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.
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