What Next?
The gold stocks still look ugly, as does the silver chart. Gold is not exactly pretty either. The circumstantial evidence for tight supplies and market intervention is high. In exactly the opposite of the stock market where every indicator looks way overbought, gold looks oversold. The hot money has made its way to the Yen carry trade and has drawn a lot of money from gold.
We're putting the finishing touches on a detailed report, but we'll leave you with this chart to show the correlation we're working on. Look at gold's peak in 2011 and then the October high. It's right when the Yen started its crash down. The control boyz we're ready and had been primed. They borrowed the Yen at 0.4% rates and a Yen at 72 on the index and have made a killing putting the money in the Japan and USA stock market, and even buying Greek bonds at 30 cents to the dollar that are near par. In short, they have made a killing and it drew the hot money out of gold. That is why there was no support when gold went to 1525 in April and crashed. The liquidity and support had been removed from gold and the control boys have been slamming gold ever since.
Odds favor the 1333-1338 or the 1310-1325 area are the best bets for a gold low this week. We won't rule out 1280 but we feel that is a much lower chance than the first two levels we gave. We also think this is the last down week for gold before a rally begins between May 21st to 27th. The medium term trends remain down, but a 3 to 8 week rally should develop if silver makes a new low and gold doesn't.
Gold cycles are in high favor of a low point as we have a Fibonacci 89 weeks from the top in August 2011 and this is week 34 in silver. We also have 55 months from the 2008 crash low. We are also at the one year anniversary from the 2012 gold low. So cycles are aligned up and now we need to see price make some type of flush and reverse. On a longer term basis, the rise in the US dollar, the yen carry trade and what looks to be an improving US economy (which we don't believe the economy part), has the Feds seriously thinking how they can exit the stimulus program. With Europe in a full fledged recession and a major German election in September the Feds want to do all they can to keep Merkel in office. A lower Euro (they think) would help their economy. If they get the notion to try and end the stimulus the interest rate factor could do what its going in Japan---and that's going up hard. That would actually add to an already strong dollar.
