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Technical Analysis

Gold Update - Now it's really getting exciting...

by Ivano Celia, on Mar 27, 2020 5:15:33 PM

The Current Situation

Gold makes the current stock market situation even more exciting. Currently, massive divergences between the spot price and the quotation of the current future are opening up. While the spot market and thus ultimately the GLD are absolutely in line with the primary expectation, the future is pushing them massively upwards and almost reached the last high at $1704.

Given the structure of this movement, as well as the massively overbought condition, one can only conclude that a corrective counter movement is underway. Which could even theoretically build a new high. So this does not look like a breakout at the moment. Even for such a course, the market would again move back significantly and thus allow an entry. It is rather unlikely that the market will manage this.

However, the physical demand for gold has exploded. Gold online traders can no longer deliver and are weeks behind schedule. The ZKB, with the largest gold reserves in Switzerland, can no longer deliver/sell gold as of yesterday. The sell-able gold has run out! You have to imagine that. According to the bank, yesterday alone more than 500 orders could NOT be processed in the processing centre Kloten. From now on only the very small gold bars are available and in limited quantities per account holder.

Will Gold Prices Continue to Diverge?

Thus, an inflationary development could very soon occur for gold, if the prices for paper gold on the stock exchange and the prices for physical gold continue to diverge and above all are no longer available. It is obvious that the financial world is doing everything possible to keep the price of gold artificially under control. Because gold is always traded against currencies, when values of gold increase, money currencies decrease in value. Which is only logical in view of the unlimited quantities and duration of the National Banks' money-printing operations - first and foremost the most important among them; the American FED.

Those who can, should look quickly to keep between 20 - 30% of their assets in physical gold (in the bank vault). According to the prominent recommendation of Oswald Grübeln (formerly UBS). If such an important Swiss banker keeps 30 % of his assets in physical gold in his bank vault, one should at least do the same. No one who has read this article should complain - if he is at a disadvantage when his currency (Swiss franc, dollar, euro etc.) depreciates. See also current article on finanzmarktwelt.

What Happens Beyond COVID-19?

We have now most likely entered a deflationary phase, given the decline in demand and corona situation and uncertainties. But this will change abruptly when we return to normality. What will happen when an enormous amount of money meets scarce goods? What does not seem to be clear to us at the moment - at least not to most of us - is that we already have shortages of practically all imaginable and unimaginable goods. And, this is true despite the fact that people cannot physically shop or spend their money at all - except online. What do you think will happen when people let go? Many people with a lot of liquidity face a limited supply of goods, after all, they couldn't spend their money very well lately.

Supply and demand

If demand is higher than supply, prices rise. That is why the manipulation by the banks is so obvious. If you can no longer buy gold, at least the price should go through the roof. Which is not yet the case. Back to the normal goods. Inflation after deflation is ahead of us and is pure economic logic. Depending on the situation, hyper-inflation can occurs. This is the situation when, for example, 1 pack of toilet paper suddenly costs CHF 50, CHF 500 or CHF 5,000 instead of CHF 5. Just a real example what hyper-inflation can mean in concrete terms. Everyone can think up and imagine their own examples. Not so nice. Don't you agree? Then look back in history or ask a historian. Brave new world! Or better; just "new world"? I will be the first to rejoice if I'm completely wrong. To be continued.... Here on this blog.

Stay healthy!

Topic:Asset AllocationActive TradingRisk ManagementInvestment StrategyGoldCommoditiesInflationVolatilityRecession
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About this blog is a personal finance blog. The articles posted provide relevant trading information, aspects, and opinions from expert professional traders and data and analytics providers.

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