Gold and Silver: The June Swoon
Graceland Updates 4am-7am
June 2, 2015
- The month of June is typically a boring one for gold and silver price action, although the latter half of the month tends to be a bit better for gold.
- Please click here now. That's the seasonal chart for silver, courtesy of Dimitri Speck.
- India is the world's main market for silver, and demand shrivels a bit during the May - June timeframe.
- As a result, the silver price usually swoons, and frustrated investors can make irrational statements about this mighty metal.
- It's just a seasonal swoon, like an ocean tide change. The silver price tide will come back stronger than ever, because demand from the Hindu religion is cyclical and inelastic.
- India is now the world's fastest growing major economy. As the citizens get "richer", they celebrate key gold and silver buying festivals with bigger purchases.
- Please click here now. That's a five minute bars chart for silver (July contract), highlighting yesterday's price action.
- Without the bedrock of strong seasonal demand from India right now, news like the upcoming US jobs report on Friday can create a lot of intraday price volatility.
- Please click here now. That's the seasonal chart for gold. Gold typically bottoms around mid-June, after peaking around mid-May.
- In my professional opinion, as demand in India wanes a bit, amateur technical analysts in the Western gold community tend to get somewhat overly-nervous about what is really just a short term lull in demand.
- Unfortunately, I think a lot of the spike in fear each May and June may be related to their excess use of leverage.
- There's no need to point gigantic arrows towards drastically lower prices on the gold and silver charts now, regardless of what shapes, patterns, and signals appear to be there.
- Charts don't make fundamentals. Fundamentals make charts.
- On that note, please click here now. That's the daily chart for gold. The recent price action has been "seasonally perfect". A peak occurred in mid-May, and gold has drifted lower, logically, since then.
- The bottom seasonal line: Eager gold and silver price enthusiasts should expect a major rally to begin in about two weeks, and continue for several months.
- Please click here now. Gold jewellery is the biggest source of demand for gold, and most jewellers in China, Dubai, and India are in "expansion mode".
- Indian gold jewellery demand is growing about 15% a year, while mine supply grows at about 1% a year. Looking at these numbers alone, it doesn't take a rocket scientist to see why borrowing money from banks to bet on lower gold and silver prices, is not very wise.
- Gold jewellery was never taken by the US government during the last bout of confiscation/revaluation. It can be insured and stored legally in safe deposit boxes. So, it's truly great news to see the World Gold Council taking concrete steps to further expand demand for the "ultimate asset".
- While demand for gold and silver are soft due to the Hindu calendar, the US stock market is beginning to look a bit like an old sailboat manned by heroin addicts, heading into a hurricane.
- Please click here now. In the big picture, QE has been tapered to zero, inflationary rate hikes are imminent, US frackers are counting on OPEC to bail them out, and yet mainstream media continues to call the US economy's minus 0.7% performance in 2015 Q1 a "world leader".
- Goldman Sachs economists are calling the US stock market overvalued by almost every metric they use. They've lowered their long term forecast to under 2% GDP growth.
- Alan Greenspan, who has no "book to talk" now, has called the US government's general approach to building a welfare state "unsustainable". When considering the current minor cyclical lull in gold and silver demand related to the Hindu religion, against the background of the dire need for an America soaked in "debtaholic napalm" to reflate itself, any sane investor is going choose the mighty metals as their prime investment vehicle of choice in the coming years.
- Please click here now. That's the daily chart for Barrick Gold. I've highlighted the main recent intermediate trend movements with solid green and red arrows. The arrows are nicely in sync now, with the seasonal gold chart trends. Note the excellent position of my key 14,7,7 Stochastics oscillator, at the bottom of the chart!
- I use Newmont as a leading indicator for the entire gold mining stock sector, and Barrick as a confirming indicator. Also, I suggested a few months ago that Barrick was likely to form an interesting right shoulder of a complex inverse head and shoulders bottom pattern, and drop towards the $11 area. That's in play now, and all gold mining stock fans should highlight the mid-June timeframe on their calendars. It's a highly likely turning point for Barrick, and for the entire sector!
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