Week in Review with Michael Oliver

OliverMSA.com put out the chart on your left, as well as this explanation: “Well, gold didn’t wait until June to blast out its monthly momentum zero line (3-mo. avg.). It was at that zero line level in early April that the rally failed. Also, the rally in mid-May failed at the zero line. Those two peaks thereby set up the structure at the zero line. Now, with May’s monthly close, it’s a triple-top breakout by momentum. 

Gold’s weekly momentum emerged to the upside in mid-May, now followed by this monthly momentum oscillator (plotted in daily bar format). MSA argues that the intermediate trend’s transition from negative to positive is now complete as of Friday. We expect gold’s next move will be to challenge the all-too-obvious price chart line around gold’s February high just above $1340 (a structure that asset managers around the globe are no doubt watching). 

And the action on the first day of June is continuing to move with urgency as well. The settlement today is above all prior rally high closes with exception of the February peak close. Wonder why the speed? Suspect gold knows something about the S&P500 and the pending rapid demise once again in the Dollar Index. 

Michael also provided a weekly gold price chart, shown on your left, with the following comments: “MSA does not emphasize price chart technicals. Those are the indicators everyone sees and they’re often deceptive. 

However, there are times when price does provide correct indications, even if lagged to momentum’s. In this case, we have a nearly flat line of resistance on price that investors and asset managers are very much aware of. Cross this structure, and money will flow aggressively into gold and related. 

In fact, our assumption is that an intermediate upturn resumption in gold, now underway, will likely engage this structure soon. And once it’s engaged, we expect the first surge, post-breakout, to reach $1520, give or take, before even taking a breath. 

One can plot the red line various ways: across highs, through weekly closes, or, if using a monthly bar chart, through monthly closes. They all tend to agree that getting back to the February high will again put pressure on the structure. We think that even touching $1340 will launch the situation. More or less an upside crash-type event is what we expect. So let’s see how long it takes to get from the May close at $1305.80 to $1340 again. Today certainly suggests tonal change and speed. 

As MSA has argued for a few months, this entire intermediate trend pullback is one of the most timid pullbacks from the mid-$1300s in the past five years and likely would remain gentle. And the timid nature of that pullback indicates that firm bidding was up under this market. Bidding that is anticipating dark times for the developed economy stock indices—and rapidly better times for gold and related.  And as we have said before, as gold emerges expect the silver market and gold miners to begin to outpace gold in percentage terms.”

Michael put this missive out on Monday. You would have done well to have had it then. Keep in mind that Michael has a lower priced service that covers precious metals without the large number of other markets that he follows. Go here https://www.olivermsa.com/subscribe.html to sign up for the precious metals service or better yet his comprehensive service that provides coverage of a huge number of markets.

Obviously gold broke well above $1,340 in the cash market on June 7, as the green line in the Kitco chart above shows. But it pulled back by the end of the day. My belief is that, given Michael’s momentum work, the odds favor a breakthrough this time, though it is a given that the government/central bank/Wall Street status quo who hate gold and love counterfeit U.S. dollars will do everything under the kitchen sink to try to keep the dollar elevated in the hearts and minds of the masses. But apart from Wall Street and Washington’s selfishness, given the misuse of the dollar by policymakers to fund endless wars, regime changes, and the impoverishment and destruction of America’s middle class, there is a growing clamor for honest money (gold) not only by competing world powers but even by a few brave souls within the U.S. as well. 

My friend Jeff Dahl sent along some verbiage from Russian President Vladimir Putin, who was quoted as saying the following: “The role of the U.S. dollar as a reserve currency should be reconsidered since it has become Washington’s political weapon, Russian President Vladimir Putin told participants at the St. Petersburg International Economic Forum. 

“Deep changes require adaptation of international financial organizations, reconsidering the role of the dollar, which after it became international reserve currency, turned into the tool of pressure of the country of issue on the rest of the world today.” He also was reported to have said that U.S. actions undermine the advantages created by the Bretton Woods system, thus, “trust in the U.S. dollar is falling. 

Putin also pointed out that the dominance of the greenback fails to solve major problems, such as how to reach a balance in currency relationships and trade exchange. He said that “While the U.S. loves to talk about freedom and equality, including in relation to trade, it tries to spread its jurisdiction to the rest of the world and uses all means necessary to keep its dominance.” He noted that “States that previously advocated the principles of freedom of trade, fair and open competition, started speaking the language of trade wars and sanctions, blatant economic raiding, arm twisting, intimidation, eliminating competitors by so-called non-market methods.” 

Not only Putin, but also Malaysian Prime Minister Mahathir Mohamad has suggested that East Asia should consider a common trading currency backed by gold, saying the current foreign exchange system tied to the U.S. dollar was prone to manipulation. These leaders understand that when Nixon removed gold from the dollar and by extension in the global economy it paved the way for a massive global power grab by the U.S.  But no doubt these views are much more widely held than is verbally made public. Why else are China, Russia, Iran, Turkey, and other political pains for the U.S. building up their gold reserves?

And as Hugo-Salinas Price recently pointed out, it also paved the way for a redistribution of wealth in the U.S.—from the middle classes to the upper classes, because to hold the reserve currency a country has to orchestrate chronic trade deficits to ensure there is global liquidity in that currency.

No doubt it is the concern of Americans that is behind Judy Shelton’s promotion of a return to the gold standard. She is an economic advisor to President Donald Trump. Not only has she made it known that she believes we should go back to a gold standard but also that she is a huge critic of the Fed. This of course fits very well with Donald Trump’s advocacy for the dwindling American middle class that had their jobs sacrificed on the phony altar of free trade, which wasn’t free at all because it was designed to bleed America of higher value added manufacturing jobs. It boosted corporate profits by hiring poor downtrodden workers in China then built up massive dollar reserves used to become a world power at the longer term expense of America.

Above left is my chart that posts the monthly average price of gold dating back to 1995. This is a beautiful cup-and-handle formation that suggests to me that gold does not want to go down as measured in the world’s reserve currency. The average gold price for the month of June so far is $1,330.36. The 20-month average is $1,279.27 and the 40-month average is $1,270.33. Clearly price momentum is on the upswing. Michael’s work suggests that buying pressure is building up under this market, no doubt from savvy investors who realize we are overdue for another credit market/equity market disaster. I hope and pray that is not the case. But history, along with a nation that is becoming ever more insolvent by the day, suggests disaster knocking on the door. It’s healthy to hope we are wrong. It’s equally healthy to prepare for the worst in case we are right.