Gold is showing solid rallies from my $1310 area buy zone (basis April futures). From both a love trade and fear trade perspective, the fundamental picture is becoming more positive.

I’ve repeatedly highlighted the fact that while America has the world’s richest economy, China’s economy is vastly bigger.

Courtesy of the Visual Capitalist, this snapshot of Chinese commodity demand should provide a significant confidence booster shot for investors.

The huge demand puts a floor of support under commodities like gold… even on minor price declines.

Double-click to enlarge this daily gold chart.

Gold is rallying for a second time from my $1310 buy zone, and there is a positive non-confirmation in play with the Stochastics oscillator.

Since hitting the $1370 resistance zone in late January, gold has consolidated in a drifting rectangular pattern. The odds of an upside breakout from this pattern are about 67%.

Importantly, that breakout implies that the price would move above the huge resistance zone at $1370!

While the gold trading volume on the Dubai Gold & Commodities Exchange (DGCX) is nowhere near the size of COMEX volume, it’s growing relentlessly while COMEX volume appears to have peaked.

The SGE (Shanghai Gold Exchange) is helping the DGCX. The Sharia-compliant spot gold contract launch is quite important because it should bring more stability to the overall gold price discovery process.

A rise above $1370 against the background of rising institutional money manager concern about inflation in the West would be another huge confidence boost for investors, both in America and in China.

Double-click to enlarge.  

The current price action of the dollar against the safe haven yen is truly horrific. 

It’s another stronger indicator that gold is poised to move above $1370.

Double-click to enlarge.  

The oil market price action is becoming concerning. 

Some of the decline can be attributed to rising US supply, but the price action is eerily similar to the US stock market. That synergy suggests that oil traders are concerned that the US economic numbers may be peaking, leading to a drop of demand for oil.

Double-click to enlarge.  

The US dollar is moving strongly higher in USD-CAD trading.  

I refer to the Canadian dollar as the “Cbone”, because it is the backbone of the Canadian banking system and government. Oil exports play a big role in the Canadian economy. 

The Cbone appears to be getting pummelled by inflationary tariff concerns and a potential collapse in US oil demand.

Gold often rises when commodity currencies like the Cbone rise, but in the current situation, the big FOREX traders appear to be mainly focused on what inflation and collapsing economic demand in America would mean for the US government’s ability to finance itself.

The bottom line is that twenty years of declining money velocity are coming to an end. A new inflationary era is being born in the West, albeit at a snail’s pace. That is a source of frustration for some gold stock enthusiasts. 

The good news is that current time frame is probably best compared to 1968 – 1970, when interest rates and inflation began to rise. 

Gold stocks perform like champions in this type of environment once the concept of growing stagflation gains widespread institutional acceptance. That time is approaching quickly now.

Double-click to enlarge this GDX daily chart. 

Range traders should take note of the buy zone at $21 and the sell zone at $25. This trading range has been in play for about a year.

If gold bursts above $1370 with rising inflation in the West and the new Dubai spot gold contract serving as wind at its back, GDX should explode upwards above $25. This would in turn see many more institutional investors come to embrace gold stocks as offering generational value with the best potential for price appreciation!