3 Must-See Charts on Gold

Gold is trading at its lowest level in a month. The bearish mood on the Street is palpable. Good! That, in turn, is dragging down the shares of otherwise great miners.

I knew an old Wall Street trader, Charles Belida, now deceased. When he started his first job on Wall Street, he still had an outhouse. He had a great saying for times like this:

“When the paddy wagon comes along, it takes the good girls downtown along with the bad.”

By that, I mean we’re getting down to where some great mining, development and exploration stocks have become real bargains!

Why is gold down? It’s not China and India, which have seen sales rise nicely recently. No, it’s because traders expect the Fed to keep raising interest rates.

My view: Baloney!

Janet Yellen and the Fed won’t raise rates anytime soon. (Just yesterday, they decided to hold the benchmark rate steady at 0.75%-1%.) Oh sure, they may talk the talk about hiking rates. But they won’t walk the walk. Not until maybe much later this year.

Why? Because what kind of Fed is dumb enough to raise rates when …

  First-quarter GDP growth came in at 0.7%. The weakest in three years.

  Inflation just barely reached the Fed’s 2% inflation target. And the latest numbers from around the world show inflation is cooling.

  Economic surprises have been more bad than good lately. Did you see that parade of pain on auto sales? One manufacturer after another missed targets.

Bottom line: There’s the potential for real trouble on the horizon for the global economy. The Fed would be fools to raise again anytime soon.

So, sure. The Fed will hint that rate hikes are right around the corner. But that kind of charade can only last so long.

Recently, I posted a chart saying how I hoped for gold to pull back to its uptrend. That is happening now.

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You can see that gold broke resistance-turned-support, and also its 200-day moving average. Now, it is right on that uptrend.

It wouldn’t surprise me if gold, even though it is very oversold, breaks the uptrend just enough to scare out the weak bullish hands.

A recovery from a broken uptrend would not be expected. But we know that the market likes to inflict the maximum amount of pain on the most people.

And sure, gold COULD go lower still.

So where would gold find support next? I have a chart for that, too.

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You can see Fibonacci support right at Wednesday’s low of $1,243.  Below that is $1,209. And there’s even more around $1,171.  That lines up with the uptrend from the bottom on spot gold.

I don’t expect we’ll see gold go down to test those lower support levels. But it’s nice to know they’re there.

And let me show you what the smart money around the world is doing. This is a chart of all the gold held by all the world’s physical ETFs. Gold AND silver. This is through Monday.

The orange is gold holdings, the white is silver. Sure, we’ve seen a sell-off in U.S.-based physical ETFs. But obviously, other investors around the world see this as an opportunity. They are buy-buy-buying.

So, as I said in my column on Monday, bring on the deeper sell-off. I’m licking my chops, thinking about the bargains we’ll get. Buying the big dips is how quick fortunes are made.

All the best,
Sean Brodrick

Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit. Working on…