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Gold's Goals for 2018 - Craig Hemke (31/01/2018)

Abstract image of three gold bars with multiple upward trending graphs

January 31, 2018

 

After gaining nearly 14% in 2017 and posting its best annual gain since 2010, COMEX gold looks poised to move higher this year and finally break out in its renewed bull market.

A number of factors have played a role in gold's rise from the bear market lows of December 2015. Among these are:

a generally falling USDJPY and Dollar Index

continually low global interest rates

lack of fiscal discipline in the United Sates

geo-political uncertainty around the globe

As we move into 2018, factors pushing gold higher will include political risk in the US, continued geo-political risk and a growing trend toward de-dollarization. We wrote about these themes a few weeks ago and you can find the column here: https://www.sprottmoney.com/Blog/the-three-major-t...

These "risks" will help further drive down the value of the US dollar. A falling dollar will, in turn, spark a continued rally in commodities. Active money managers will seek to allocate assets toward the commodity sector and away from overvalued sectors such as equities and bonds. This soon creates a virtuous cycle of higher highs and higher lows as the renewed bull market is perceived and grudgingly accepted.

Though the bear market bottom of December 2015 is now clearly visible in hindsight, not many folks were able to see the turn at the time. The same will be said for the breakout and resumption of the bull market. So, how and when will the average gold investor know that price has finally turned the corner? When we look at the chart, we get a rather clear answer.

Below are weekly and monthly charts of COMEX gold. As you can see, over four years have been spent building a broad and rounded bottom. A breakout from this bowl will occur as price moves up and through $1,400. After a successful test of $1,400 as support in the days that follow the breakout, new and even higher highs will confirm that much higher prices are ahead.

 

 

 

 

 

Also driving this move higher is a confluence of positive technical factors. Note that COMEX gold's 50-week moving average is above its 100-week, and that both are above the 200-week, while all of them are sloping higher. This technical configuration prompts the commodity trading funds to be biased long and buy on the dips, also creating a virtuous cycle of higher prices.

 

 

 

So relax, be happy and prepare for higher gold prices in 2018. The move through $1,400 will set up a move toward $1,525. An eventual break of $1,525 will set the stage for a move to the old 2011 highs, perhaps as soon as next year. The time to position yourself to take advantage of this renewed bull market is now.

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About the Author

Our 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.

*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.

Comments

Ben
February 1, 2018 at 12:04 PM
Craig Hemke's comments are useful and at the same time worrying. Surely nobody in their right mind wants higher commodity prices? I am 100% bullion allocated, and yet even I do not want higher PM prices. I and my extended family are heavily committed to saving in PM. We have fiat money cash flows flowing into the bullion markets. We need PM prices to be as low as possible. At some point, the PM paper price suppression scheme will fail, and then global GDP might fall by 90%, but surely nobody in their right mind actually wants that to happen? One needs to think of the PM price peak in 2011 as a deliberate bubble created by excess paper speculation in gold. The last such deliberate bubble was created in 1980. Following that, the World's Senior banker was able to create the illusion that gold was unimportant for the next 20-years. The only thing holding them back now is that they seem to be flat out of gold and that many non-G7 central banks are buying with both hands, So Craig is probably correct, but anyone who applauds what might happen does not understand gold at all.
Trace Young
April 10, 2018 at 2:28 PM
Hi Craig, I read your article posted to SilverDoctors a couple days ago and have been looking at some other information w.r.t. this totally out of the blue unexpectedly super bullish set up for silver and I started wondering, 'What if the Banks are setting this up on purpose and if so, why now, what is their motivation or plan?' I wrote the following response to another analysts post (regarding the suddenly super bullish setup that is appearing out of nowhere): **Why are the Commercials (Banks) Long Silver for the first time ever?** Do they see another bank 'bailout' coming and seeing that, do they plan to leech every last scrap of value from the U.S.? Might they rig PMs up instead of down so that they can snap up what is left of our nation with gold and silver that has gone from extremely undervalued to extremely overvalued? Do they think since it is already mathematically impossible to make good on our existing debt + unfunded liabilities, that another bailout will == an implicit default? (The next bailout is already written into law BTW). Given that the Fed must first loan our government any 'money' (debt) needed to 'bail out' the banks yet again, seems they'd be in a position to see 'the writing on the wall' if anyone was. Does the Fed think that the massive stress of another 'bail out' will make it a bail out in name only? Given our lost manufacturing base, do they look upon a 'Service' economy as a bogus economy since it is mostly based on profits from imports sold to people that can't afford them? The banks may be many things, but stupid is not one of them. It wouldn't surprise me if they have long ago determined that the U.S. is scheduled to become a potato republic. If so, then they have also probably already decided the next country or countries they will use for their 'power base', to leech the wealth out of and promulgate their long planned agenda from. Does this seem remotely plausible? Regards, Trace