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Over 35 years experience working in oil and gas accounting with privately held oil and gas producing companies. Also have a blog that covers monetary system issues and the potential for major future monetary system change. (http://lonestarwhitehouse.blogspot.com/)  - email: ... more

Despite Negative Sentiment Some See Signs of Coming Rally in Gold

Date: Wednesday, August 2, 2017 1:43 PM EDT

Gold has been somewhat lackluster in recent years along with silver. After the huge rally leading to an all time high in gold around $1900 an ounce and a big move up in silver to nearly $50 an ounce, it's mostly been all downhill for both metals. Of course there have been a few minor rallies along the way, but anyone who bought gold and silver near those highs and held them is down quite a bit.

 

All this has led to a very high level of negative sentiment in the market for gold and silver. US Mint coins sales are down this year after being pretty strong for several years. Gold and silver mining company stocks did have a nice run in the first half of 2016, but then proceeded to give up much of those gains and have been less than exciting in 2017 so far. Are there any indications that things might change in 2017?

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Lately, I am seeing a number of different indicators that seem to suggest the gold market could move higher even as most do not expect that right now. Below is a bullet point list of various different factors that might come together to give gold and silver a boost.

 

- Jim Rickards forecast to me in an email in March 2017 included a comment that he felt gold would rally in the last half of 2017. You can see his email to me on that in this article.

 

- Andrew Maguire's comments about the launch of a new gold backed cryptocurrency (BullionCoin) that we have covered here. He says the launch of this new currency will generate tons of additional new demand for physical gold and silver that will "reset" gold and silver prices higher due to demand vs. available supply in the actual physical markets for both metals. See more details on this in the timeline below.

 

-IMF says the US dollar is overvalued by 10 to 20 per cent. If that is true and the US dollar drops that much, gold should get lift from that.

 

-Reuters reports that India will lower taxes on gold which may boost demand there

 

-some technical analysts believe they see indications that a major rally is coming for gold and silver. Here is one and here is another. Stewart Thompson sees a possible eventual gold break above $1335 leading to a move towards $1400 in this commentary.

 

-there are no signs of letup in gold buying by China (and Russia) even as both gold and silver appear to be seeing peaks in production volumes by miners

 

So there you have it. All combined these factors seem to indicate conditions favorable to gold and silver demand at a time when the supply may be peaking out. Mines cannot quickly respond to falling production because of the lead time required to get mines up and running. Contrarians also believe that when sentiment is low, that may be another sign that a market is making a bottom and ready to move higher. 

 

We'll keep an eye on the gold and silver markets the rest of this year and see what happens. Gold is one of the key signals we always watch anyway in terms of things that can indicate there is systemic stress.

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