Hello Old Friend… Gold Nears $1,350 Resistance (That Has Repelled It 4 Times In 5 Years)

Wednesday, February 20, 2019
By Paul Martin

by John Rubino via DollarCollapse.com,
ZeroHedge.com
Wed, 02/20/2019

The past five years have been baffling for gold bugs. In an environment of massive central bank money creation, rising government deficits and a populist takeover of many countries’ political systems – all of which should be great for safe haven assets – gold has spiked to around $1,350 four times, only to be smacked back down each time. Very demoralizing.

And now it’s gearing up for another try.

It’s obvious that the forces now at work in the world will eventually send terrified capital pouring into sound money like gold and silver — and that, from a technical standpoint, piercing $1,350 resistance should trigger a big, fast move to the next resistance level somewhere in the high $1,400s.

But the “when” part of this story has become an embarrassment, given the number of disappointments the past few years have dished out.

So why risk ridicule by going back there? Because, damn it, $1,350 will be not just pierced but shattered one of these days. And next week could be the week.

I know, Charlie Brown’s football, Einstein’s definition of insanity, Sisyphus’s boulder, some people never learn. But the world really is set up for serious instability, and two new factors have swung in gold’s favor since the last failed attempt.

First, central banks have become fairly aggressive net buyers of gold. Recall that not so long ago central banks as a group were dumping gold on the market in order to “diversify” their reserves into government bonds. Now they’ve apparently seen the error of that approach and are back to buying. See Central bank gold buying hits highest level in half a century.

This is a big, not-especially-price-sensitive new source of demand that might not view $1,350 as a reason to slow down.

Second, the Fed, which had been promising to tighten for years and then actually did tighten for one year was, like the proverbial mule, smacked in the head with a stock market two-by-four. That got its attention, and the tightening has stopped, to be replaced shortly with another, probably much bigger round of easing.

This aligns the US with other major countries, which are already easing. Japan, for instance, is now apparently doubling down on its high-fiscal deficit/NIRP experiment:

Architect of BoJ stimulus calls for big fiscal spending backed by c-bank
(Reuters) – Japan must ramp up fiscal spending with debt bankrolled by the central bank, the Bank of Japan’s former deputy governor Kikuo Iwata said, a controversial proposal that highlights the BOJ’s challenge as it tries to reignite an economy after years of sub-par growth.

Iwata, an architect of the BOJ’s massive bond-buying programme dubbed “quantitative and qualitative easing” (QQE), warned that inflation will miss the central bank’s 2 percent target without stronger measures to boost consumption.

That means Japan must lean on fiscal policy by ditching this year’s scheduled sales tax hike and committing to boost government spending permanently with money printed by the BOJ, he said.

“Inflation won’t hit 2 percent just with the BOJ continuing its current policy. The BOJ doesn’t need to change its policy much now. What needs to change is fiscal policy,” Iwata said.

“Fiscal and monetary policies need to work as one, so that more money is spent on fiscal measures and the total money going out to the economy increases as a result,” he told Reuters on Friday. “That’s the only remaining policy option.”

Instead of relying on commercial banks to lend more to already cash-rich companies, the BOJ should finance government spending for measures to boost consumption such as payouts or tax breaks for younger-generation households, he said.

His proposal resembles the idea of “helicopter money” – a policy where the central bank directly finances government spending by underwriting bonds.

Europe, now descending into what might be the death throes of its post-WWII single market plan, has one and only one chance to salvage it: Aggressive banking integration funded with extremely easy money.

The Rest…HERE

One Response to “Hello Old Friend… Gold Nears $1,350 Resistance (That Has Repelled It 4 Times In 5 Years)”

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