A more aggressive devaluation of paper currencies is on the horizon thus the whole PM Complex is completely underpriced. Averaging in from this point on seems warranted. Below is a full explanation as to why that is the case.
So says Goldrunner (www.goldrunnerfractalanalysis.com) in edited excerpts from his most recent newsletter* to subscribers posted here with permission. Go here to subscribe and receive his unique analyses with one-of-a-kind charting.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Goldrunner goes on to say in further edited excerpts:
What has really changed?
The Fed is still printing Dollars via QE with the world still shunning Dollars. Thus, Dollar supply is rising while Dollar demand is falling. This is very Gold friendly, in fact, it is what creates big Bull Gold Markets. There is no real way that this relationship can change with the economy mired in a stagflation depression. Massive debts must come off of the world-wide books before anything changes. The options remain for us to see outright deflation to reduce the debts, or for the Fed and other Central Banks to continue [to] devalue the paper currencies to devalue the debts. [Read: Governments Will Want – Will NEED – Much Higher Gold Prices! Here’s Why and Central Bank Gold Purchases up 17% – Here’s Why You Should Jump in or Top Up Too]
The bottoming action last week looks good with the PM Stocks leading the way, yet we could see a lot of volatility before a large move up; or, we could still see a bit lower lows. Shorts come in to cover in spurts unless they have a major reason to aggressively cover, putting in a “V-shaped bottom.” Thus, the probabilities are that we will have some testing and filling before the PM Complex rips back up, or some kind of failure wave down, first.
What really happened?
It…looks like this whole “paper” charade was sparked by Europe’s failure to move to more aggressive Euro QE printing. The Fed’s Banks have full control over Gold via the paper gold futures market so they shorted and traded Gold sideways as the GS boyz [Goldman Sachs boys]converged on Europe to try to sell the QE way. After reaching the log channel bottom in Gold, they elected to take Gold down via paper gold rather than to risk Gold going into free-rise, prematurely. All of this price movement in Gold allowed the Funds to short the PM Stocks with no risk so they hammered them lower. We know through JS [Jim Sinclair] that the Fed Banks tipped off the Funds that they were going to hammer paper gold several months, ago, but the odds are that they have been “tipping” the large funds most of the way.
With the PM Stocks under pressure to fund new projects before Gold rips higher, many PM companies did big private placements of shares to large funds. In some cases these Funds covered shorts, but I suspect many of these transactions were set-up [to] facilitate further shorting of PM Stocks. A fund comes in to take a large position in a PM company, telling the company that they do NOT want it hedging its exposure to Gold or to Silver- that they want exposure to the upside in Gold. Then the Fund sells leveraged call options against the shares at higher prices, or buys leveraged puts. They benefit from leverage on the downside, and then cover their leveraged bets with huge profits, holding the original stock to benefit on the upside once they cover. This was probably what we saw last week- leveraged downside looking to start to cover. If the covering continues unabated, then we could see a V-shaped bottom in the making- but a few days doesn’t mean much, yet.
We have recently been noting the huge divergence on the charts with the RSI not confirming the moves lower in PM Pricing. This looks like a sign of a major bottom set-up, but the divergences can take some time to play out.
Where do we go from here?
The price movements in the PM Stock Indices look…[to be] forming a huge A, B, C correction that had gone to new highs. This is really strange looking on the charts, but does mimic what we saw in 2001 and in 2004/ 2005, minus the new high. A huge A, B, C on the charts, here, would look to give way to a true Wave III on the upside; rejiggered via this paper gold attack by the Fed and its banks. If so, then we would look for the coming Wave III to trade similarly to the 3rd wave upside we saw in 2002 and 2005/ 2006. Both were parabolic rises after the bottom was in. This is probably a “characteristic of Fed pleasure” that is unique to the current environment of K-Winter price management this time around.[I am]…familiar with the 3rd wave design from 2002 and 2005/ 2006 for the PM Stocks since I had used 2002 to lay out the price movements for the HUI in 2005/ 2006 before they happened. This week I will go through the charts to see what looks interesting. The bottom line is that the bottom may, or may not, be “in” at this time. If we trade like the similar A, B, C correction bottoms in the PM Stocks that I have mentioned, above, then we would probably trade a bit lower. That is, unless something spooks the shorts to cover faster.
- What looked like a perfectly good 3rd wave move on the charts for the PM Stocks, now looks to have been re-engineered via paper gold and shorting into an A, B, C correction off the 2008 HUI top.
- The “B Wave” moved to new highs which is pretty bizarre considering how long the HUI price stayed up there. [There is] little doubt this was orchestrated via paper gold, and the paper gold false pricing system gives the Fed full control of the Gold market price in that way.
- The PM market action gives me little concern since the Fed needs Gold vastly higher (As do all the Central Banks) if they are going to use Gold…to balance the budgets/ balance sheets. Thus, I still expect Gold to be headed for our $10,000 to $12,000 target range, or higher…and
- PM Stocks Indices will then…run vastly higher as we have been expecting, and the major 3rd and 5th waves should still run similar to the late 70’s surrogate charts.
At this time, it appears that Reward is very high for the PM Complex, with Risk very low.
Happy 4th of July to those of you in the States [happy July 1st to those of you in Canada and best regards to all you reading this article elsewhere from around the world]!
For the moment, GOLDRUNNER ~ Email me at GOLDRUNNER44@AOL.COM with your questions and comments.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*Goldrunner offers a subscription service which provides detailed technical analysis of where the price of gold, silver and precious metal stocks are going in each stage of their respective bull runs. This service comes with detailed charting based on conventional technical analysis and his proprietary fractal analysis based on the ’70s. Go here to subscribe.
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