Will we see a second leg to the Gold Bull market?

The short answer is YES.

 

In a previous post I have used the graph of FSM and GPL, two of the hottest silver miners. Both showed a flag formation. The breakout occurred on the downside. The retrenchment was considerable. True to form, a flag formation does not tell you if the breakout will come up or down. Interestingly, the gold miner index (HUI) did not suffer a big drop. This is one of the indications that the bull market in miners is still intact AND HAS FAR TO GO.

 

 

 

Note that since the January breakout, the 50 Day Moving Average is describing a growing gap with the 200 Day Moving Average and that the recent move of the gold price to the 1,250 area is still above the 50 DMA.  All these are indications that the rally in gold stocks is intact. That is the technical picture. Reputable experts indicate that the market is not yet ready to move up significantly. The current phase can be considered a consolidation.

 

The fundamentals have not changed.

There is a constant drawdown in equity funds in stocks and ETFs and the housing market is not doing well. Economic recovery is a mirage fostered  by the White House. Debt continues to grow(credit cards - 1T, student loans - 1.3T and auto loans - 1T). There is talk of doing away with cash, which will serve tax collectors but will have very little positive effect on the economy.

 

One of the most telling indicator was the summoning of Yellen by Obama to the White House. While there was no report on discussions, Obama is worried about the possible rise in interest rates on the election. As I described in a previous post, Obama is worried about Clinton losing the election. Under these circumstances, the FED is not likely to raise interest rates. Why not? Because higher rates would wreck the Stock Market and cause a surge in the deficit. Without a rise in interest rates and an increase in the value of the US Dollar, gold will break out of its consolidation. When? Probably after the next FED meeting. But, predicting is hard, especially the future (Yogi B.).