As most NIA members are well aware, NIA has developed a proprietary system for analyzing the latest fundamentals of gold to determine gold’s latest short-term fundamental fair value that gold prices are likely to quickly revert back to within the following few weeks. NIA’s system has established itself as the world’s #1 most accurate leading indicator for forecasting the short/medium-term price movements of gold.
Since 2010, NIA’s exclusive one-of-a-kind gold undervalued/overvalued ratio has ranged from a low of -0.83 to a high of 1.29, with the normal fair value trading range for gold being -0.26 to 0.37. Gold becomes undervalued when NIA’s indicator declines below -0.26 and extremely undervalued when it declines below -0.45. Gold becomes overvalued when NIA’s indicator rises above 0.37 and extremely overvalued when it rises above 0.62.
On Thursday, NIA’s world-renowned gold indicator declined to -0.47 putting gold in extremely undervalued territory for the first time since February 3, 2016. Currently, gold is trading for $1,132 per oz with a short-term fundamental fair value of $1,210 per oz – making it due for an explosive short-term rally of $78 per oz!
Back on February 3rd, gold was trading for $1,141 per oz with an undervalued/overvalued ratio of -0.53 and a short-term fundamental fair value of $1,246 per oz. Gold was due for a HUGE short-term rally of $105 per oz. Over the following month, gold exploded upward by $116 per oz to close on March 3, 2016 at $1,257 per oz!
Gold’s fundamentals have strengthened significantly from one year ago, with the 5-year breakeven inflation rate based on the Treasury Inflation-Protected Securities (TIPS) market rising by 59 basis points to 1.84%. However. some of gold’s fundamental strength has been dampened by the Fed Funds Futures market. After initially falling 81.5 basis points to a July 6th level of 0.535%, which coincided with gold reaching its 2016 high of $1,367 per oz – the Forward 24-Month Fed Funds Rate has increased 110 basis points to a current level of 1.635%.
The Forward 24-Month Fed Funds Rate is likely to make a dramatic decline in January – as soon as the current “Trump Rally” reverses. In recent weeks, the stock market was manipulated higher due to an artificial lack of supply/selling. With Trump promising massive tax cuts in 2017, any investor that planned to cash out and take profits on their current holdings – has made a post-election decision to hold onto their shares until early-2017, believing they will be able to pay a lower tax rate. In January, when all of this supply suddenly hits the market at once – the Dow could easily decline by 1,000-2,000 points in a single day.
The stock market is currently in a “blow off top” phase due to a perfect storm of the share supply being artificially suppressed, investor optimism unjustifiably exploding to a new 9-year high, and the financial media’s sudden 180-degree shift in narrative to how Trump will be implementing a $1 trillion+ infrastructure fiscal spending plan that will make it easy for the Federal Reserve to normalize interest rates without causing a collapse in U.S. asset prices!
As gold prices rally $78 per oz in the weeks ahead, we believe the stock GoldMoney (TSX: XAU) will capitalize the most because they have patented technology that allows people to easily own fully allocated gold stored in vaults that they can spend at any store in any currency using a GoldMoney Mastercard! Look for XAU to explode from its current price of below $3 to a share price of above $5 in the weeks ahead! This is a digital gold currency play that will also benefit big from the recently exploding price of Bitcoin!