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Waiting for the Glass Ceiling to Break

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We have tried to break 1800 in Gold on at least 4 occasions and we’re trying again as I type. It’s safe to say that when this level breaks, one should expect a sharp rise higher.

The latest attempt yesterday was undermined by a nonsensical comment from Yellen:

"May need rate hikes to stop the economy from overheating."

This had the effect of causing Gold to dump from 1800:

dbrady analysis

Damage done, Yellen quickly recanted her statement:

“Let me be clear it’s not something I’m predicting or recommending.”

Then why say it?

Gold put a double bottom in place at 1770 and then head back up to resistance again:

dbrady analysis

Unless we get some new algo triggering news, it looks like a break of 1800 is imminent. We keep testing that 1800 level and more frequently now, which signals it impending demise as a resistance level.

So why would the authorities want to cap Gold? That’s a long story for another article but suffice to say that inflation is soaring in necessities like food, lumber, and industrial metals and materials. One just has to look at the commodity futures over the past year. The Fed doesn’t want to admit that, citing the rise in prices as transitory, because it would reveal the main effect of their constant dollar printing. A soaring Gold price would expose the truth to everyone and further undermine confidence in the dollar. This would create a vicious cycle downwards in the dollar, cause inflation to ramp even higher and faster and Gold with it. Put simply, the Fed would lose control of the situation. If it becomes clear that inflation is soaring, the Fed can’t raise rates and risk collapsing everything. It’s game over for them. Hyperinflation now or hyperinflation later? They prefer later, at a time of their designation.

I don’t believe they can keep the lid on Gold much longer, the demand is too high and rising. However, they can stage what I term an “organized retreat”. This means the Gold heads up but every opportunity possible is used to force short-term pullbacks along the way. They don’t want Gold taking off like a rocket. It may be inevitable but they will try to delay it as long as possible. Case in point yesterday.

The same goes for Silver at its Tuesday peak of 27.24, GDX at 36.84, and SILJ at 16.29. Support levels are at 1770 and 1755 in Gold, 26.16 and 25.75 in Silver, 34.21 in GDX, and 14.73 in SILJ. Any news that does trigger an Algo-driven sell-off is likely to be truly transitory imho.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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