The quant who produces Trader Tracks newsletter tells The Gold Report that the technical charts project a brightening future for precious metals. Technical market analyst Roger Wiegand tracks annual trading cycles while keeping an expert eye on potentially disruptive world events. He is a stickler for fundamentals, though, when it comes to picking out the best juniors for safe bets in a cash-poor industry.
The Gold Report: In early 2012, Roger, you predictedthat the price of gold would rise to over $2,000/ounce ($2,000/oz) during the year. But as the overall stock market increased in value, the yellow metal went in the opposite direction. What happened?
Roger Wiegand: Two things happened. First, the last gold peak almost made it. It went to $1,923/oz, and that was a technical and fundamental top. Then it sold down. The other thing that happened is that the U.S. Treasury intentionally sold gold to protect the stock and bond markets. Treasury feared that if gold ran up too high too quickly, people would dump securities en masse.
We are in the seasonal cycle when many markets go sideways. We have seen the selloff at the end of last week. A triple bottom is extremely bullish. The snap back in the price going long could be impressive.
TGR: What factors are keeping gold down in the near term?
RW: Gold is taking a pounding since the big bullion banks have full control and they have to cover their radical short positions taken at the behest of the FOMC and U.S. Treasury to preserve the fiat markets. Briefly, they kept the gold market under control to prevent a runaway for the FOMC and are now using TARP bank capital and derivative dollars to drive gold to the basement. Next, they are accumulating all the gold bullion they can to preserve their wealth in the forthcoming legendary crash. In addition, they get to buy it on the cheap as the dumb money is in full exit in fear.
Also, China, South Korea and Japan have problems and each central bank is dealing American bonds. Recently, China sold American paper through its own markets in order to offload Treasury bonds for currency. All kinds of problems are looming in China; some experts claim that China's export trade numbers are only half of what was actually reported. South Korea is clearly weakening, and Japan is experiencing an emergency, causing it to stimulate at twice Mr. Bernanke's rate. That is simply unsustainable. Japan is the Achilles heel of the whole financial system. If the yen runs away, it's a disaster.
What does that mean for gold? Starting in August, the price will likely rise until the end of September. Then harsh political and economic factors will create serious problems in the global markets: I'm calling for a 50% correction in the U.S. stock markets in Q4/13.
TGR: In your June 6 newsletter, you said that we are on the verge of a brand new world.
RW: The brand new world is imminent because the lessons of 2008 were not learned. The banks are doing the same bad things they were doing before the crash, only worse. The derivative markets are larger now than they were back then. A huge number of student loans might well be written off. And the real estate market is doing a rerun. Incredible! People with foreclosures who may not be qualified for a new mortgage are receiving Federal Housing Authority-insured loans in a desperate effort to try to prop up the home loan industry, which is a major sector of the U.S. economy.
We are in a depression, not a recession. The real numbers for unemployment in the U.S. are 25%. They were 25% in the 1930s. In Spain, 54% of the workers under age 25 are unemployed. The down-the-hill slide is global and in slow motion. People still believe a lot of media nonsense, but this market simply has not corrected. The ultimate jobs program will be a new war.
TGR: Where do you think a war will break out, Roger?
RW: Iraq is cranking up for another round. War is on the agenda in Turkey. Libya has bad problems, not to mention the horror that is Syria. China is beating a war drum, but that's just talk. North Korea is not capable of going to war. But more wars over energy resources will continue to break out in the Middle East.
War creates jobs. World War II ended the Depression of the 1930s. I don't think there will be a nuclear war, but three or four conventional wars can go on simultaneously, hire a lot of people, square away the economy and get things righted in the bond market.