Gold is no longer vulnerable. It has entered a nice buying area.
The $1225 – $1200 price zone is both technically and fundamentally important. Here’s why:
The average cost of producing gold is now approximately $1210. Fundamentally oriented money managers of size are almost always buyers when gold dips into the cost of production zone.
For a look at the technical action.
(Click on image to enlarge)
The $1225 – $1200 zone is decent support. It’s not huge support, but it’s decent. I was a modest buyer in the $1220 area this week, after being a seller at $1305 – $1320 last week.
I think a lot of people believed that the election of Trump would send gold skyrocketing, but I called gold “vulnerable†going into election night.
The bottom line is that Trump is “supportive†for gold. His economic plan will increase the size of an already out of control US government debt. His infrastructure spending plans are inflationary.Â
It’s impossible for America to grow its way out of the unfunded liabilities nightmare it faces.
The debt problem can’t be fixed with more taxes. It can’t be fixed with less taxes. It can’t be fixed with more growth. It certainly can’t be fixed with more debt.Â
America’s epic debt problem can’t be fixed at all. Debt needs to be paid, and it isn’t going to get paid. That’s why investors need to own gold.  Simply put, in the big picture, Trump’s election is good news for gold, but in the short term, $1305 -$1320 is significant sell-side resistance.
As gold surged in the first half of 2016, miners engaged in significant hedging on the COMEX. With the price now near the cost of production again, they appear to be pulling off those hedges. That’s very good news.
(Click on image to enlarge)
That’s another look at the daily gold chart.
The $1218 area is a key 50% Fibonacci retracement. When the price of an asset pulls back to an important Fibonacci line, investors are not guaranteed “free moneyâ€Â if they buy, but if important fundamental news is at hand, it is a key buying area.
