Gold: The Significance Of $1320

I told subscribers to expect $1320 to function as a headwind for gold on this rally, and that’s happening right on schedule. To understand the nature of this headwind…

  Double-click to enlarge this important weekly gold chart.

Note that the two biggest volume bars both occurred as key events in India occurred. It could be said that when America catches a general stock market cold, world markets get the flu. 

Horrifically, when India catches the gold demand sniffles, Western gold and silver stocks can look like they have financial Ebola.

It’s clear that $1320 has functioned as a significant headwind to all the major rallies of the past four years. The good news is that technically, resistance weakens the more times it is tested. I’ve predicted that gold is nearing the day when it shoots up above $1320 and begins the climb towards the next massive resistance zone at $1500.

Will India be the catalyst that launches the price blast to the upside? Well, that’s the most likely scenario, but a big helping hand could come from new central bank chief Powell in America. He’s due to be sworn in on February 4, 2018. That’s less than a month from now.

Powell’s proposed deregulation of America’s small banking industry, combined with rate hikes and quantitative tightening (QT) should create a major money velocity bull cycle. That bull cycle is more important to gold stocks than bullion. There’s no point buying gold stocks if they can’t outperform low risk bullion.

For bullion, the most likely catalyst for significantly higher prices is a long overdue gold import duty cut in India.

The good news is that I’m predicting that both a duty cut and the US money velocity bull cycle are coming. India has national elections in 2019 and Prime Minister Modi’s promises to help jewellers and create a million jobs a month are dismal failures.

To win the election, it’s likely that Modi soon starts spending money like water and asks his finance minister Jaitley to cut the gold import duty. With both India and Powell poised to take action that is positive for gold, all precious metals market investors (both bullion and mine stocks) should feel very comfortable now.