Gold Flash Crash

It’s been a very tough few months for gold share owners but I’m feeling a lot more confident at the end of this week after seeing gold hold above the $1,750 level and watching a 23-minute video discussion between Matterhorn principals Egon von Greyerz and Matthew Piepenburg address gold’s recent “flash crash” in the context of technicals, fundamentals, and good old-fashioned price manipulation from the bullion banks.

Gold was smacked down in the paper markets starting on August 6 when the London PM Fix fell from ~$1,800 to $1,762. But that was only the beginning. On Monday, August 9, gold fell to $1,738 and then on August 10, it was smacked down another $15, to $1,723. Most remarkable was the hit job put on gold on August 9 because the sellers picked the time in Asia when there were absolutely no buyers, to dump $4 billion worth of paper gold sales in approximately 15 minutes so that they could optimize the gold price decline. Matthew explained the driving force for maximum hit job was to enable bullion banks to buy physical gold as cheaply as possible to begin to add gold to their balance sheets in preparation for the enactment of Basel III that goes into effect in London on January 3, 2022.

If Matthew is right, and I think he is, then one wonders if there might not be more such midnight gold raids between now and the end of this year. But if there are, it’s hard to believe they will be terribly successful, given the data displayed on the “blue” chart above on your left. As Egon noted in the video, when factoring in the amount of monetary inflation, gold is as inexpensive now as it was when it sold at ~250 in the early 2000s. Moreover, Michael Oliver’s shorter-term work is consistent with the notion we are likely at a bottom. Referring to the chart directly on your left, Egon showed that despite this manipulation by the bullion banks the gold price has managed to stay above the downtrend line from gold’s high of over $2,000 in Feb. 2019 in a very natural A-B-C Elliott wave pattern. Gold’s rise late this week suggests it will hold above that downtrend support line before rising up in the next C wave. In the video, Egon called for the C wave, which is the most powerful Elliot wave to take gold to $3,000.

He also pointed to the very bullish cup-and-handle chart formation, which you can see from my monthly average gold price chart on your right. The bottom of the cup was formed at ~$250 in the mid 2000s. The red line on my chart is the monthly average, the lavender line the 20-month average, and the yellow line is the 40-month average. As of this writing halfway through the month of August, the average price of gold is $1,774.21, compared to a 20-month average of $1,783.04 and a 40-month average of $1,556.81. If Egon and Michael are right, we should be getting set for the next major move higher in gold, and our long-suffering gold shares should be on a tear. One thing we do know is that even though the paper markets have been slammed, according to Bullion Star’s Ronan Manly, 4 demand for physical gold has been on fire!

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.