Dan Norcini continues:

“You may very well get a lift in gold based on the type of monetary response that may come out of Jackson Hole.  The other situation which could escalate and have a huge impact in the key markets, particularly crude oil and gold, is the disintegration that is taking place in Syria.

If the war begins to engulf a broader scope of the Middle-East, bringing Israel and Iran into conflict, that powder keg could create an explosion higher in the price of both crude oil and gold....

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“Crude oil would soar and that would bring bring big money into the gold market.

So there are a number of things which could light a fire under the gold market here.  If we look at reports coming out of Europe today, it looks as though we could also see some action by the ECB around the September 3rd time frame.  That is also very close to the time when the Fed will be meeting at Jackson Hole.

So it is quite possible that we could see some significant fireworks ahead of those two events, particularly if news leaks out ahead of time that a major stimulus will be taking place.  While it is possible we could just see gold mark time here for the next couple of weeks before those critical meetings, I would not rule out the possibility of a major move beginning in August.  This is the type of atmosphere we are dealing with today.  Anything could happen.”

Norcini also added:  “As far as the mining shares are concerned, the HUI is starting to look a lot more constructive.  Resistance levels now stair-step higher in 20 point increments.  If the HUI is able to clear 420, the next overhead supply is at 440, followed by 460. 

But 460 is a huge area for the HUI.  If the bulls can push the Gold Bugs Index above the 460 level, with conviction, you will most likely see a quick move to 500.  That 460 area was a double-top back in late May and early June. 

KWN readers need to watch how the big-cap stocks are acting, particularly Newmont Mining.  Newmont has started to show tremendous technical improvement.  It is way too early to tell, but if the HUI puts in a significant move, it is quite possible for Newmont to make its way as high as the $60 area.  That would be a move of more than 30% for Newmont.

It is entirely possible that the miners could also lead gold here.  If the miners start going, Eric, it will be because larger players perceive that monetary stimulus is going to proceed.  I believe at this point the miners are at the mercy of expectations of QE and the actions of the ECB.

I also strongly believe that one of the reasons the HUI looks better than the price of gold, in terms of the chart, is because of the severe undervaluation of the mining sector as a whole.  The miners are down at a level that shows extreme and truly remarkable undervaluation. 

Since the 10th of May, the lows on the HUI have been tested three times.  What is happening is we have seen very large, well-heeled players coming in and buying the HUI very aggressively on dips below the 400 level.  Every time the bears push it below the 400 level, the large scale buying overwhelms them.

We will have to wait and see, but what I am saying is we cannot rule out the possibility of a big move taking place during the month of August.  We saw a big move just ahead of summer in 2011, which stunned participants, so yes, anything is possible.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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Eric King

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