With fear subsiding, gold has become less desirable, for the moment. And that could trigger an excellent buying opportunity in the coming weeks.
In April, the personal savings rate jumped to a record 33%. Many were unprepared, financially, for the economic fallout. This spike is savings illustrates a desire never to be caught off-guard again. The renewed “preparedness mindset” will sustain a multi-year advance in precious metals, but prices may go a little lower first.
The Fed’s balance sheet jumped to 7.186 trillion. Some economists believe it could reach 14 trillion if there is a second wave of infections.
The 1918 Flu pandemic had three waves. The second wave was by far the worst transpiring in the fall of 1918.
It seems every other year gold consolidates for a few months before breaking sharply lower. We had similar consolidations in 2016 and 2018. Each resulted in a significant breakdown once gold fell below vital support. I do not think the 2020 breakdown will be as severe (gold is in a bull market this time). Nevertheless, a deeper than expected correction remains feasible.
THE 2016 CONSOLIDATION:
THE 2018 CONSOLIDATION:
THE 2020 CONSOLIDATION
Overall, I think the 2020 consolidation could go on for another month or so. Eventually, prices should break below $1660, and approach our primary target between $1500 and $1550. A deeper correction to the secondary target ($1350-$1420) remains possible…if liquidity continues to flow into the stock market.
Overall, gold continues to consolidate. I continue to look for a much better buying opportunity later this year. Longer-term, demand for precious metals should remain high as debt expands, endlessly. Individual investors are beginning to wake up as they lose confidence in governments and their ability to manage.
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AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.