Melt-up, Up, and Away

Au Report

Source: Michael J. Ballanger for Streetwise Reports 01/05/2018

Precious metals expert Michael Ballanger likes what he sees for gold in 2018’s first week of trading.

While the moniker for this missive is “Gold and Gold Miners,” I just sit back in absolute AWE as the global equity investors (otherwise known as “Stock jockeys”) have decided that “cash is TRASH!” and despite a massive “miss” in the employment numbers this morning, within seconds of the release, the spin doctors manning the equity trading desks deemed that number “bullish” because it is less inflationary and may cause the Fed to “pause.” So dollar-yen rallies, the USD index has a minor pop, gold sells off, and stocks come out of the gate up another 0.25% with all of the bubblicious bravado of a high school quarterback getting his first win.

The chart of the S&P shown below is a classic illustration of what occurs when global central banks open up the monetary spigots and flood the world financial markets with unchallenged credit and liability-free liquidity. It is this “inflationary spiral” that enhances “the replacement value of equities” and sends literally everything skyward. Since the two biggest collateral risks to the banks are real estate and stock buyback loans, it is no surprise that this tsunami of phony, counterfeit currency of all colors indiscriminate of flag has not only mitigated those risks but also floated the underlying collateral into the ozone layer. Don’t forget that even Ben Bernanke admitted that no one could predict the outcome of all of that “quantitative easing” that saved JPM and Goldman and Citi and BofA from disappearing from the face of the earth and now we are seeing what currency debasement exercises are truly all about. Record highs EVERYWHERE (except gold and silver) as monetary inflation sows its price inflation seeds.

My buddy David Chapman was the first to predict this final-stage blow-off top or “melt-up” and is quick to remind me that RSI has stayed in the 70s for the S&P and NASDAQ for many, many weeks before succumbing to profit-taking and that if this truly is a new bull move for gold, the HUI [Amex Gold BUGS Index] (and the Gold and Gold Miner ETFs) can too stay elevated above 70 for quite awhile. I can’t recall the period of time when the RSI resided in or neared 70 for more than a few weeks before correcting but the S&P chart illustrates overbought conditions starting in the typically weak October period with RSI breaking above 70 six times by year-end. That, my friends, was too much liquidity chasing too few stocks—and it isn’t the “too few stocks” that should be deemed the scapegoat.

David Tepper came out this morning with the “stocks are as cheap today as they were in 2016” mantra, citing “extraordinarily low interest rates” and “low inflation” as the reasons for this call but as I hurled a …read more

Source:: The Gold Report