SPDR fund tonnage (GLD-NYSE) has recaptured the 800 ton mark, and rose to 814 yesterday. This is happening as a steady wave of institutional money managers embrace gold as an important portfolio component.
It’s also occurring as Indian dealers begin buying for Diwali. The result of this overall ramp-up in demand is a beautiful surge higher in the gold price!
I call this my “Road To $1392” chart.
When the price of an asset arrives at major resistance in a huge chart pattern, a real upside breakout and sustained move higher can only occur if market fundamentals are aligned with the technical set-up.
The good news is that for gold, this appears to be the case.
The $1377 – $1392 price range is the resistance zone of a huge inverse head and shoulders bottom pattern. It is the neckline of the pattern.
Note the tremendous rise in volume that is occurring as gold makes a beeline to that neckline. The Indian gold market has completed its restructuring, and Western money managers are lining up to add gold to their portfolios.
The managers are not just making a one-time purchase. They are adding gold as a percentage allocation. That allocation seems to be averaging around 5%. As the funds gather new assets, they buy more gold to maintain that 5% allocation.
Asian fund managers typically give gold an even higher allocation to gold in their funds than Western managers. As China and India become the main economic empires, Western money managers will tend to play “follow the Chindian leader”.
That means the current Western money manager allocation to gold that is about 5% could easily rise to 10% or 15% in the coming years. Clearly, all liquidity flow lights for gold…are green!
My weekly chart roadmap suggests that gold will rise not just to $1392, but to $1526, and $1800. Importantly, the rise will be accompanied by substantial growth in respect for gold as an asset class.
