“S&P 500 calls are more attractive now than

at any time on record.” – Goldman Sachs, 3.7.2016

The SPX’s bear-market rally continued powering higher in
March, artificially extended by a spectacular orgy of central-
bank dovishness. Four separate times central banks rushed
to the rescue as the rally was stalling out! First it was dovish
Fed-official jawboning, then a major ECB easing, then a dov-
ish FOMC surprise, then a dovish Janet Yellen speech. The
extremely-complacent stock markets can’t rally for long with-
out central-bank intervention, an ominous portent heading in-
to a Q1 earnings season looking to be exceptionally weak.
Rather impressively, the renewed stock-market levitation
didn’t stem 2016’s massive investment buying of gold. Stock
investors continued aggressively buying GLD shares faster
than gold was being bought, shunting that capital directly in-
to physical bullion. After February saw the biggest inflows of
capital into GLD in many years, the ongoing strong buying in
March is very bullish. Even with lofty stock markets and gold
consolidating, investors continued to start to realize that their
portfolios need to be diversified with gold. A full mean rever-
sion to normal gold-investment levels will take years of buy-
ing following late 2015’s extreme and anomalous low.
Gold hit an important milestone early last month, crossing
the +20% threshold to enter its first bull market since 2011!
A Golden Cross also triggered, the king of technical buy sig-
nals. When a 50dma crosses back over a 200dma following
a major secular low, it almost always signals the early days
of a new years-long bull. Gold spent most of March consoli-
dating high despite that central-bank-conjured stock-market
levitation. That was an incredible show of strength, since it’s
weak stock markets that kindle gold investment demand for
diversification. As long as investors continue migrating back
into gold, gold’s young bull market will remain very healthy.
The gold stocks enjoyed a very strong month too, consoli-
dating high with gold. That was a major victory considering
their exceptional February surge. Sharp moves higher gen-
erate excessive greed that has to be dissipated before rally-
ing can continue. This can be accomplished through prices
with corrections, or through time with consolidations. There
is no doubt the latter is more bullish, reflecting investors who
are highly convicted prices are heading much higher so they
are unwilling to sell. Consolidations are also far less likely to
trigger stop losses, which helps build investors’ confidence in
young bull markets. The HUI saw a Golden Cross too!
After lagging gold’s strong 2016 advance, silver started to
catch up in March. Investment buying finally began returning
after being all but nonexistent in January and February. This
new demand created a Golden Cross buy signal in silver as
well. Silver acts like a gold sentiment gauge, with buyers on-
ly flocking in when they expect sustainable gold rallying. So
silver advances often lag gold’s early in new bulls when lots
of skepticism remains. Silver’s awakening is a major vote of
confidence for gold’s new bull, which silver will catch up with
then eventually surpass and leverage in performance.

ZEAL INTELLIGENCE WWW.ZEALLLC.COM © 2016 ZEAL LLC APRIL 2016 PAGE 1/8

CBS’ DOVISH ORGY
March was dominated by global central banks’ spectacu-
lar orgy of dovishness. Their frenzied easing and jawboning
about easing succeeded in extending the bear-market rally
in stock markets, just as they intended. But this resulted in
extreme overboughtness, with all kinds of warning signs of
serious downside risk flashing. Meanwhile gold and its min-
ers’ stocks proved exceptionally resilient, consolidating high
and biding their time for the next stock-market selloff.
Dovish Fed Jawboning Ignites SPX Breakout
As February drew to a close, global central banks were
in full-on panic mode. Stock-market losses were awful as of
mid-February, and stocks were starting to roll over again as
February waned. At worst by that point YTD, the American
SPX had plunged 10.5%, the German DAX 18.5%, and the
Chinese SSEC 25.0%! Central bankers have always feared
stock-market selloffs because of their devastating impact to
sentiment and activity across entire national economies. So
they weren’t going to let the markets fall without a fight.
The People’s Bank of China led the way on February’s fi-
nal trading day, with a surprise 50bp cut to banks’ reserve-
requirement ratio to 17.0%. The timing was suspicious, just
days after China had hosted a G20 conference. Given all
the frantic central-bank easing in March, some traders think
it was coordinated at that meeting. China’s first triple-R cut
of 2016, and its 5th since 2015 dawned, failed to inspire any
confidence in Chinese traders. The SSEC plunged 2.9% on
this central-bank show of no-confidence. Soon after the lat-
est read on Eurozone inflation fell to -0.2% YoY on a head-
line basis, and just +0.8% YoY on a core basis! That raised
the odds the ECB would be forced to act at its March 10th
meeting. Such global weakness pushed the SPX 0.8% low-
er to 1932, which helped boost gold by 1.3% to $1239.
For 6 trading days in a row ending on February 29th, the
SPX couldn’t break through the strong overhead resistance
of its 50dma. That implied the bear-market rally was failing,
an outcome that terrified central bankers. So still in China
as March 1st arrived, the influential New York Fed president
kicked off last month’s dovefest. He is the only regional Fed
president with a permanent voting slot in the FOMC. To an
audience in Hangzhou, China, William Dudley said, “I judge
that the balance of risks to my growth and inflation outlooks
may be starting to tilt slightly to the downside.” Such dov-
ishness was enough to unleash a 1.7% rally in the SSEC
despite that day’s ugly recessionary reads in both China’s
official and Caixin PMIs. That dovish-Fed rally was quick to
spill into Europe too, with the DAX blasting up 2.3% despite
a very-weak Eurozone PMI as well. This global momentum
ignited the SPX, which soared 2.4% to 1978 while ignoring
a recessionary 49.5 ISM PMI in the US. The Fed had jaw-
boned the SPX to a major breakout above its 50dma!
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Big Gold Investment Buying Kindles New Bull!
Gold’s reaction to the second-biggest SPX up day of this
year was rather impressive, it merely gave back 0.7%. But
the big news was stock investors were still flooding into gold
on March 1st. GLD’s holdings surged 1.1% on heavy differ-
ential buying pressure for GLD shares. It was super-bullish
to see the big GLD builds continue in early March after such
an enormous 16.1% or 108.0t build in February. That was
the biggest monthly build GLD had seen in percentage and
absolute terms since February 2009 and May 2010! 2016’s
gold rally has been fueled by heavy investor buying, which
is the critical primary ingredient in gold bull markets. Inves-
tors have to take the gold-buying baton from futures specu-
lators, since the former have vastly larger pools of capital.
The 1st also marked the end of a lackluster CoT week in
which gold edged up 0.4%. American gold-futures specula-
tors bought the equivalent of 25.8t of gold that CoT week. It
was great to see that eclipsed by GLD’s 33.9t build over the
same span, driven by investor buying. That awesome trend
would continue throughout March, despite the central-bank-
extended bear-market rally in stocks dampening sentiment.
The 2nd began with ADP’s preview of US private-sector
jobs growth of 214k in February beating the expectations of
+190k. At 2pm, the Fed released its Beige Book economic
report used by the FOMC to help their decision process. It
noted rising wage pressures across the US, a tiding of infla-
tion raising the odds that the FOMC’s March 16th decision
would be hawkish. Nevertheless, the SPX climbed another
0.4% to regain January 6th levels. But consensus earnings
forecasts had fallen 5% since then, leaving the SPX looking
even more overbought. Gold rebounded 0.7% higher.
Early on the 3rd, elite Wall Street bank JPMorgan went
underweight US stocks for the first time in years. It pointed
out that the SPX’s forward P/E with 2016’s estimated profits
was 16.8x then compared to 16.6x at the end of 2015. So
stocks were getting more expensive despite their prices be-
ing lower! JPMorgan advised to overweight gold. Later on
the ISM services read saw its employment sub-index fall in-
to negative territory for the first time in 2 years. As services
were supposed to be strong to offset the chronic weakness
in manufacturing, all kinds of jobs worries arose. So traders
started to believe the FOMC would have to moderate its ex-
pected hawkishness at its upcoming mid-March meeting.
The SPX only climbed 0.3% on this bad-data-breeding-
Fed-dovishness development, but gold blasted 1.8% higher
on the lower likelihood of more rate hikes soon. GLD’s solid
0.6% build certainly helped, and gold’s $1263 close proved
an important milestone. Up 20.1% off mid-December’s 6.1-
year secular low that day, gold officially entered bull-market
territory! This was gold’s first foray into bull-market territory
since its August 2011 peak, proving 2016’s run is way differ-
ent from recent years’ short-lived short-covering rallies.
Warning! At Zeal LLC we take pride in our research and go to great lengths to ensure this Zeal
Intelligence newsletter is accurate. We obtain data from many sources believed to be reliable
and only present information believed to be accurate and factual. Nevertheless, the absolute
accuracy of source data cannot be guaranteed by Zeal LLC. Any action taken as a result of
reading this newsletter is solely the responsibility of the reader. Zeal LLC is not and does not
profess to be a professional investment advisor. We strongly encourage all readers to consult
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vestment decisions. Zeal LLC’s members, employees, and associated individuals may own or
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© 2016 ZEAL LLC APRIL 2016 PAGE 2/8
 Jobs Friday Tilts Fed Risks Back to Hawkish Draghi Finally Unleashes ECB’s Bazooka
Jobs Friday arrived on the 4th with a big upside surprise. As gold futures are such a hyper-leveraged and exceed-
The Labor Department claimed the US created 242k jobs in ingly-risky game, speculators must have high conviction that
February, far ahead of the +190k expected! On top of that, gold is heading higher to add to their long positions. So the
there were another +30k in past-month revisions. And the magnitude of their long buying in any CoT week, as well as
unemployment rate held at 4.9%, the lowest level since way the total size of their long-side bets, reflects their sentiment
back in February 2008 before the stock panic. While most on gold. And with speculators holding 306.4k long contracts
of the jobs created were low-paying ones in areas including as of the 8th, they were getting really bullish. They had not
education, retail, and hospitality, this hot jobs report certain- had larger collective upside bets on gold since way back in
ly was very hawkish from a Fed perspective. That morning, November 2012 before QE3 ramped to full steam! These
traders assumed the FOMC had to signal at its mid-March spec longs were actually 17.9k contracts above their 2009-
meeting that it was preparing to hike rates again soon. to-2012 normal-years average, leaving lots of room for sell-
With gold at a bull high, it wouldn’t have surprised at all if ing if something spooked these guys. Futures speculators
such hawkish major economic data spawned a sharp selloff. betting heavily one way is often a contrarian indicator.
Indeed gold dropped to $1250 soon after that report. But it The 9th was very quiet heading into the ECB’s universal-
turned around in a sharp V-bounce, and surged to $1280 in ly-anticipated decision the next morning. The SPX climbed
the next 90 minutes! Though gold’s gains faded to a -0.3% 0.5%, while gold shed 0.8%. Interestingly crude oil surged
close at $1259, the fact that gold didn’t plunge was a great 5.4% to close above $38, despite a 3.9m-barrel build in the
testament to its strength. Upside jobs surprises were recent US inventories taking them to a record 522m barrels! Oil’s
years’ worst big-gold-selloff-sparking catalysts after FOMC 39.9% surge since the SPX’s mid-February bounce by that
meetings. Yet gold held its ground even with expectations point had nothing to do with fundamentals, as they actually
surging for more rate hikes soon on that data. Interestingly deteriorated considerably over that span. Oil’s surge was a
the SPX only edged 0.3% higher, with its bear-market rally euphoric short-covering reaction to the SPX’s bear-market
already nearing exhaustion in early March. With these Fed- rally, nothing more. With global supplies remaining way up
levitated stock markets, good economic news is bad since it at record levels, oil is going to crater during the SPX’s next
ups the odds the FOMC will repeal more easing sooner. downleg. That will once again decimate oil-stock prices.
Monday the 7th was very quiet, with the SPX unchanged The 10th brought the ECB’s decision, the most-important
and gold advancing 0.6% to $1267 and another bull-market market event of March. It was highly hyped, with top ECB
high. This was despite comments from a couple of FOMC officials setting high expectations for action. Yet since pres-
voting members suggesting more rate hikes were coming in ident Mario Draghi has a long history of talking a big game
2016. Provocatively Goldman Sachs told its portfolio-man- before disappointing, I didn’t see how the ECB could possi-
agement clients that “S&P 500 calls are more attractive now bly hope to live up to its own lofty expectations. But Draghi
than at any time on record.” This was shocking given great pulled a rabbit out of his hat, unleashing a massive kitchen-
downside risks overvalued, overbought, and overextended sink easing. It was heralded as his long-awaited bazooka!
stock markets faced! It did illustrate the mounting euphoria The ECB cut all 3 rates it controls, including pushing its
the bear-market rally spawned though. That’s the core mis- deposit rate for commercial-bank reserves held at the ECB
sion of bear-market rallies, to eradicate the previous selloff’s deeper into NIRP at -0.4%. And unlike in early December
fear while breeding sufficient complacency. That maximizes when the ECB disappointed by extending its QE instead of
losses when the bear’s next downleg catches the most trad- expanding it, the ECB delivered a major QE expansion at its
ers unaware. Stock bears are exceedingly-wily beasts. March 10th decision. Its €60b per month bond-monetization
The 8th began with more horrendous Chinese data, with campaign would be expanded to €80b per month! That was
February’s exports and imports plunging 25.4% and 13.8% a €20b or 33% jump, exceeding the €10b of the most wildly-
YoY! This was way worse than expectations of -12.5% and dovish expectations. There have long been rumors that the
-10.0%, implying a sharp global slowdown underway since ECB can’t find enough bonds to buy, so this was shocking.
China’s trading partners are the rest of the world including So the ECB also acted to circumvent supply problems. It
the US and Europe. This finally dented the universal com- upped the limit of the amount of any bond issue it could buy
placency, with the SPX dropping 1.1%. That was only the from 33% to 50%. It also rather stunningly added non-bank
second significant down day (1%+) out of 17 trading days of corporate bonds to its monetization list! This seemed like a
bear-market rallying to that point. Gold slipped 0.5%, end- desperate gambit designed to keep levitating the European
ing a very-strong CoT week where it surged 2.4% higher. It stock markets. Like here in the States, over in Europe the
was driven by futures speculators adding an epic 32.1k con- large corporations have used the ultra-low borrowing rates
tracts on the long side, their third-largest CoT week of long from ZIRP and NIRP to borrow vast sums of money to buy
buying since the dawn of 2013! That’s seriously bullish. back their own stocks. The ECB was directly funneling new
money to that effort! Imagine the stock-market reaction in
the US if the Fed started monetizing corporate bonds.
P/E Ratio Fair Value Dividend Yield Overvalued Market Cap Co >28x Co <7x No Profits Lowest P/E
S&P 500 24.9 +4% 1157 +2% 2.14% -0.15% 78% +7% $19,164b +6% 25% +2% 2% +0% 10% +0% UAL 3.0
Dow 30 20.4 +6% 12151 +1% 2.80% -0.15% 46% +9% $5,395b +7% 17% +0% 0% +0% 3% +0% JPM 9.9
NAS 100 33.1 +4% 2061 +3% 1.28% -0.05% 136% +8% $5,378b +7% 42% +2% 2% +0% 12% +0% AAL 3.7
Annual M1 Money M1/oz US Gold MZM Money MZM/oz US Gold CPI PPI <Key>
Inflation $3,096b +4.4% $11,831 +4.4% $13,872b +5.6% $53,011 +5.6% 237.11 +1.0% 181.5 -5.0% Link
ZEAL INTELLIGENCE WWW.ZEALLLC.COM © 2016 ZEAL LLC APRIL 2016 PAGE 3/8
 Wild Market Reaction to Extreme ECB Easing
The QE expansion was certainly the highlight of the ECB
decision, yet it wasn’t as impressive as headlines indicated.
A year ago in March, the ECB launched its QE at a pace of
€60b per month running until September 2016. That’s a 19-
month span for a total size of €1140b. Then December saw
that extended to March 2017, for another €360b. That took
the ECB’s total QE campaign to €1500b before March’s big
expansion. After the ECB’s decision, Draghi said in his usu-
al press conference that QE is still intended to end in March
2017. Since the new monthly €20b expansion is starting up
this month, it will add another €240b. So that’s really only a
16% expansion of the ECB’s total QE campaign. When the
Fed expanded its new QE3 back in December 2012, it more
than doubled monthly monetizations from $40b to $85b.
Still, the market reaction to the ECB’s desperate easing
was violent and fast. The euro instantly plunged 1.4%, and
that boosted the US dollar. Gold plunged from $1251 at its
prior close to $1237, largely on that surging dollar. Europe-
an stock traders loved the ECB’s surprise, with Germany’s
DAX soaring 2.8%. SPX futures only went from +0.6% prior
to the decision to +1.1% after, highlighting exhaustion. But
Draghi’s press conference starting 45 minutes after this big
decision managed to sharply reverse most of these moves.
I couldn’t believe Draghi could so screw up the impact of a
kitchen-sink easing. In his answer to a reporter’s very first
question, he committed central bankers’ cardinal sin!
Draghi was asked if the negative rates are nearing their
limit. He responded, “How low can we go? Let me say that
rates will stay low, very low, for a long period of time, and
well past the horizon of our purchases. From today’s per-
spective, and taking into account the support of our meas-
ures to growth and inflation, we don’t anticipate that it will be
necessary to reduce rates further.” I heard Draghi say this
live on Bloomberg, and I almost fell over in shock. He had
told the central-bank-easing-addicted world traders that the
ECB’s rate-cutting run had likely ended! They weren’t going
to be happy at their monetary-drug supply moderating.
That single sentence violently unwound the entire impact
of the ECB’s kitchen-sink easing. The euro rocketed up to a
+1.6% close, one of its biggest intraday swings ever. The
DAX plummeted 5.0% intraday to close 2.3% lower, also an
epic swing. The SPX finished dead flat despite the extreme
ECB easing. And gold rocketed from $1237 to $1271, clos-
ing up 1.6% at a new bull-market high! The HUI’s 3.7% ral-
ly to 179.0 on this took it to a new high of its own. Draghi’s
words had totally nullified the big ECB easing’s impact!
Relative Indicator Trading Range
Level Multiple Bias Oversold - Overbought
SPX 2059.74 1.022 Short <0.95 - >1.10
VIX 14.07 0.753 Long <0.75 - >1.75
USDX 94.62 0.975 Short <0.97 - >1.08
CRB 171.17 0.911 Long <0.85 - >1.05
Copper $2.19 0.967 Long <0.85 - >1.05
Crude Oil $38.19 0.911 neutral <0.70 - >1.10
XOI 1072.16 0.954 neutral <0.85 - >1.10
Gold $1231.50 1.080 Long <0.90 - >1.05
Silver $15.44 1.035 Long <0.80 - >1.10
HUI 178.24 1.381 Long <0.65 - >1.10
ZEAL INTELLIGENCE WWW.ZEALLLC.COM
Bank of Japan Backtracks on Unpopular NIRP
That gold buying on ECB Day was supported by another
0.8% build in GLD’s holdings to a bull high. But something
happened in the US markets that day that would change the
perceptions of the neutered ECB the next day. Though the
SPX had closed flat, it did rally 1.0% out of its lows that day
after the European markets closed. So on Friday the 11th,
the European stock traders saw this and started to believe
the ECB’s huge easing was bullish after all. So they poured
into stocks again, and the DAX soared 3.5%! This euphoria
spilled into the US, where the SPX enjoyed a 1.6% surge to
another breakout. This carried it above 2000, its second big
resistance level since breaking over its 50dma near 1950.
Closing at 2022, the SPX was right at a third key resis-
tance level of its 200dma. The ECB’s epic easing, with a bi-
zarre one-trading-day delay, had rekindled the SPX’s bear-
market rally after all. Since everything seemed awesome in
stock-land again, gold was hammered to a 1.7% loss totally
erasing its big ECB-Day gains. Futures speculators had to
be selling aggressively, and they had a lot of longs that they
could liquidate. The HUI only slipped 2.0% on this though,
so sentiment among gold-stock traders remained strong. I
can’t recall a more schizophrenic market response to a ma-
jor central-bank decision. Confidence in them is waning.
By Monday the 14th, the ECB was all but forgotten with
traders looking forward to the Fed’s decision. The SPX was
flat, but gold fell another 1.3% as the downside momentum
from the futures selling grew. American stock traders were
exiting gold, with GLD’s holdings falling 1.1% that day which
was their biggest draw of 2016. A short-lived draw is no big
deal, a correction. But a longer trend would be troubling.
The Bank of Japan’s decision arrived on the 15th, which
was the first meeting since it went NIRP in late January. It
didn’t do anything in policy terms, but it did strike the NIRP
line from its statement just 6 weeks after shocking the world
by going negative! It had said the BoJ “will cut the interest
rate further into negative territory if judged as necessary.” It
was deleted because NIRP is already deeply unpopular and
controversial in Japan. The failure of NIRP right out of the
gates over there makes it much harder for the Fed to try a
NIRP scheme over here later on. When the Fed inevitably
panics in some coming bear-market downleg, adding more
QE is its only viable option. A QE4 is growing more likely.
In the US, the February read on retail sales got a lot of
attention. It was a slight beat at -0.1% versus -0.2% expect-
ed. But the January revision was shocking, falling from the
originally-reported +0.2% to -0.4%! That report had come
out on February 12th. As an upside surprise, it provided the
initial ignition catalyst for the SPX’s bear-market rally.
Multiple Extremes (6 Months)
Low Date High Date Latest Web-Essay Link
0.899 2.11.16 1.024 3.30.16 Fed’s Market Distort. Unwind
0.725 3.30.16 1.606 1.20.16 Major Stock Bear Awakening
0.977 3.17.16 1.038 11.30.15 Trading the Parabolic Dollar
0.776 1.20.16 0.943 10.9.15 China Commodities Drag
0.794 11.23.15 1.009 3.22.16 Copper-SPX Disconnect
0.556 1.20.16 0.975 10.8.15 Energy Stocks No Bear Ref.
0.742 1.20.16 0.984 11.3.15 Energy Stocks No Bear Ref.
0.912 12.2.15 1.119 3.10.16 Massive Gold Invest. Buying
0.882 12.14.15 1.063 3.17.16 Silver’s Deep Undervaluation
0.679 10.1.15 1.428 3.16.16 Gold Stocks’ Tiny Baby Bull
© 2016 ZEAL LLC APRIL 2016 PAGE 4/8
 Dovish Fed Ignores Data, Damages Credibility
That February 12th retail-sales report had sparked a big
2.0% SPX rally, followed by additional 1.7% and 1.6% gains
on the next couple trading days. Although the SPX certain-
ly had been oversold and due to bounce, its justification of a
strengthening American consumer had been far more than
revised away! That improvement not only never happened,
but just the opposite with more intensity. The entire bear-
market rally was born on a false premise, yet the SPX only
edged 0.2% lower on March 15th as everyone awaited the
Fed. Gold slipped 0.2% as well, ending a rough CoT week
where it plunged 2.2%. Rather oddly, speculators only sold
8.9k long contracts while adding 0.9k short ones. Their total
CoT-week gold-futures selling was the equivalent of merely
30.6t, which is on the small side. The CoT’s weekly resolu-
tion likely masked big ECB-Day buying that was unwound.
Fed Day arrived on the 16th, starting out with the US CPI
inflation read for February. It came in hotter than expected
at +2.3% YoY on a core basis, significantly over the 2% tar-
get of the Fed. Even though the Fed prefers the PCE price
index published with quarterly GDP data over the CPI, with
headline inflation strengthening that ratcheted up pressure
on the FOMC to be hawkish. And with the latest unemploy-
ment rate at an 8-year low, a self-proclaimed data-depen-
dent Fed should have scrambled to hike rates that very day.
Traders expected the FOMC to strongly imply that the next
rate hike was highly probable at its mid-June meeting.
But the FOMC instead chose to jump on the rest of the
major central banks’ dovefest bandwagon, giving no hints of
when more rate hikes are coming! That defied much recent
data, which the FOMC statement even acknowledged. The
Fed wrote of “strong jobs gains” as well as “Inflation picked
up in recent months”. It also warned “global economic and
financial developments continue to pose risks.” There was
one dissenter who wanted to hike rates at that meeting, the
hawkish and courageous Esther George of Kansas City.
Since it was a quarterly meeting followed by one of Janet
Yellen’s press conferences, the FOMC also released its lat-
est Summary of Economic Projections. This includes a key
page known as “the dots”, a scatter plot showing all FOMC
members’ and regional Fed presidents’ projections of where
the federal-funds rate will be at the ends of each of the next
several years. And March’s dots were super-dovish, show-
ing collective expectations for just 2 more 25bp rate hikes in
2016! This was slashed in half from the last dots published
in mid-December after the Fed’s initial rate hike, which had
projected 4 more hikes this year. Such serious dovishness
led federal-funds-futures traders to cut the odds of April and
June rate hikes from 27% to 10% and 53% to 43%.
Janet Yellen’s press conference started a half-hour later,
and the usually-fawning economics reporters were unchar-
acteristically aggressive. CNBC’s Steve Liesman, who is a
long-time Fed defender, asked the first question wondering
if Yellen thought the Fed has a credibility problem because
it sets conditions for rate hikes but fails to follow through as
they are met! She couldn’t even answer the question, say-
ing the dots are not a promise of future action and all but ir-
relevant. She was also asked about the Fed’s political bias
because a sitting Fed governor (Lael Brainard) made multi-
ple contributions to Hillary Clinton’s presidential campaign.
It was the toughest press conference for Yellen I’ve seen.
ZEAL INTELLIGENCE WWW.ZEALLLC.COM © 2016 ZEAL LLC
Rank Hypocrisy as Fed Officials Go Hawkish
Naturally with the Fed’s dovish surprise on a day where
it was universally expected to be hawkish, markets moved.
The SPX went from slight losses pre-decision to +0.6% on
close, really a modest gain considering the catalyst. A year
ago, such a dovish surprise would’ve ignited a 2%+ up day.
But the bear-market rally is exhausted after running too far
too fast. The USDX fell off a cliff to a 1.1% loss after being
higher heading into the FOMC. After shooting parabolic in
late 2014 and early 2015 on Fed-rate-hike hopes, currency
traders are increasingly realizing the Fed is terrified of actu-
ally executing. It rightfully fears the consequences to these
Fed-levitated stock markets, so it keeps chickening out.
Though Fed-rate-hike cycles have proven very bullish for
gold historically, gold rocketed 2.4% higher on the FOMC
forecasting far fewer rate hikes this year. Gold-stock trad-
ers rejoiced, bidding the HUI a sharp 6.6% higher to 183.1
and a new bull high! Despite the HUI skyrocketing 81.9% in
just 8 weeks from the fundamentally-absurd 13.5-year secu-
lar low of mid-January, gold stocks’ young bull was still tiny
in the grand scheme. They have far more to mean revert.
The 17th proved quiet in the FOMC’s wake, but the after-
math of its dovishness lingered. The SPX climbed another
0.7% to 2041, the bear-market rally breaking out decisively
over the SPX’s 200dma. While the USDX dropped another
0.9%, gold stalled with a 0.4% loss. But GLD shares were
in high demand among stock investors, forcing a large 1.5%
holdings build which was the best of March. As long as in-
vestors keep migrating capital back into gold, its bull market
will remain strong regardless of the inevitable pullbacks.
These trends continued on the 18th, with the SPX once
again levitating 0.4% to hit 2050. The bear-market rally had
lifted this benchmark index back up to within 3.8% of its all-
time high in May 2015! It was above the levels leading into
December’s initial rate hike. So complacency was extreme
again, as evidenced by a sub-14 VIX. This fear gauge had
not fallen below 14 since mid-August, only a couple of days
before the SPX plummeted 10.2% in just 4 trading days. It
was unbelievable how precarious and risky the markets had
become thanks to that powerful bear-market rally. The fear
present at the February 11th bottom had been totally eradi-
cated. Though gold was flat, GLD experienced another big
1.5% holdings build on heavy differential share demand.
Monday the 21st saw Fed officials strike back at traders’
dovish interpretation of that FOMC meeting. The presidents
of the Richmond, San Francisco, and Atlanta Feds all said
they’d advocate the next rate hike at the FOMC’s late-April
meeting. Since that isn’t followed by a Yellen press confer-
ence, it was seen as low odds for a rate hike. While none of
these guys are voting members on the FOMC this year, the
fact they apparently didn’t fight for a less-dovish statement
just a few trading days earlier was very hypocritical. All the
regional Fed presidents are in the room and talking at each
FOMC meeting, so they still have influence. Despite the re-
newed threat of imminent rate hikes, the SPX crept higher
obliviously. But gold fell another 0.9% to $1243 on that.
Silver proved interesting that day too, closing just a little
under its $15.89 bull high achieved a couple of trading days
earlier. SLV enjoyed a 0.6% build to 330.3m ozs that day,
the latest in a string of March builds. 7 of 15 trading days in
the month to that point had seen differential SLV demand.
APRIL 2016 PAGE 5/8
 Central-Bank-Goosed Bear Rally Stalls Again
Silver really lagged gold’s rally in January and February,
raising non-confirmation concerns. As of the end of Febru-
ary, silver was up just 7.7% YTD compared to gold’s 16.9%
gain. Silver often doubles gold’s gains, so it was lagging far
behind. Much of this early-year underperformance was due
to lackluster investment demand for silver. SLV’s holdings
actually fell 2.0% in January and February, compared to the
super-strong 21.0% build in GLD’s over that span! Yet that
started to change in March. As of the 21st, SLV’s holdings
had climbed 6.0% MTD compared to GLD’s 5.7% gain. Sil-
ver was finally starting to catch up with gold since investors
are starting to believe gold’s new bull run is sustainable. As
in the past, silver’s gains will eventually surpass gold’s.
The 22nd was a very sad day as the “peaceful” religion
of Islam slaughtered and maimed more innocents in Brus-
sels. Hardly a week goes by without a Muslim massacre in
some part of the world, yet Western leaders still pretend Is-
lam is compatible with the Judeo-Christian West. Naturally
all market news that day focused on the Brussels bombings,
yet the DAX still climbed 0.4% while the SPX slid just 0.1%.
Gold had surged sharply early on, but only closed up 0.3%.
That ended a solid CoT week where gold rallied 1.2%, with
futures speculators adding 12.7k long contracts and cover-
ing 1.7k short ones for gold buying equivalent to 45.0t. At
310.2k contracts, the gold-futures longs held by specs were
the highest since October 2012 just after QE3 was born. It
was great to see GLD’s 29.4t holdings build that CoT week
again rival the speculators’ net gold-futures buying.
The 23rd started with a fascinating Bloomberg interview
of St. Louis Fed president James Bullard. A voting member
of the FOMC this year, he too advocated a rate hike at the
FOMC’s next meeting on April 27th. It was starting to look
like a regional-Fed-president insurrection against Janet Yel-
len’s extreme dovishness! Bullard also attacked the FOMC
dots, saying they contribute to market uncertainty. He said
he is thinking about unilaterally dropping out of contributing
his dots. Bullard’s hawkishness was stunningly hypocritical,
as he could have dissented at the FOMC’s meeting a week
earlier if he thought the Fed wasn’t being hawkish enough.
This relentless post-FOMC parade of Fed-official hawk-
ishness finally caught stock traders’ attention, and the SPX
drifted 0.6% lower. Unfortunately gold was hammered, with
a sharp 2.0% plunge. That makes zero sense given gold’s
powerful surges in past Fed-rate-hike cycles. Since 1971,
gold’s average gain in all Fed-rate-hike cycles was +26.9%.
In the 6 of the 11 gold rallied through, it had average gains
of +61.0%! During the last one between June 2004 to June
2006 when the Fed made 17 consecutive hikes that added
up to 425bp, gold powered 49.6% higher. Rate hikes aren’t
a threat to gold, regardless of popular groupthink today. As
gold dropped on rate-hike fears, the HUI plunged 7.4%.
More weak data came on the 24th, as US durable-goods
orders fell 1.8% on a core basis in February compared to a
-0.1% expectation. Core capital-goods orders had dropped
YoY for 13 consecutive months, the longest losing streak in
the 70-year history of this data series that wasn’t in a reces-
sion! I also saw a fascinating study done by Ned Davis Re-
search that day. It looked at the SPX since mid-1997 as if
moves on FOMC-meeting days are removed. That resulted
in the SPX trading around half prevailing levels today!
ZEAL INTELLIGENCE WWW.ZEALLLC.COM © 2016 ZEAL LLC
Gold and Gold Stocks Poised for Spring Rally
That shocking Ned Davis study again confirmed what all
traders know, that the Fed’s impact on markets is vast and
dominating. I’ve done much research on this front too, and
despise the Fed’s gross market distortions. But since they
are such an overwhelming driver of market moves, we have
no choice but to closely monitor Fed talk and actions. The
SPX rallied out of early losses that day to a flat close, and
gold slipped 0.4% to a one-month low of $1217. But GLD’s
holdings still grew 0.3% to 823.7t, a new bull high and their
best levels in 2.3 years! Again as long as investors are buy-
ing gold on balance, its new bull market will remain healthy.
While European and US markets were closed on Good
Friday the 25th, the US Commerce Department released its
latest read on Q4 GDP. It came in at an annualized growth
rate of +1.4% versus +1.0% expected, but had weak inter-
nals like much of the economic data in recent years. Profits
earned by corporations fell 8.4% annualized in Q4, making
for a full-year-2015 5.1% drop! That was the worst decline
since 2008’s stock panic, yet the SPX was high and toppy.
Monday the 28th saw a slew of economic data leading to
big downgrades to US Q1 GDP growth expectations. The
consumer-spending number came in at +0.1% in February,
while January’s was revised down from the originally-report-
ed +0.5% to just +0.1%. This led consensus estimates for
Q1 GDP growth to be slashed 0.5% to +0.9%! The Atlanta
Fed’s highly-watched Q1 GDP estimate plunged 0.8% to a
+0.6% annualized growth rate. That’s just over stall speed,
and doesn’t support near-record stock-market heights. The
SPX traded flat that day, while gold edged 0.3% higher.
The 29th was extremely interesting thanks to a speech
by Janet Yellen at the Economic Club of New York. Instead
of confirming a hawkish bias for the FOMC that the regional
Fed presidents had implied, she went super-dovish. Yellen
said the best policy now is “greater gradualism”, demanding
a slower pace of rate hikes! This really moved markets as
the text of her speech was published by the Fed a few min-
utes before it. The SPX blasted 0.9% higher that day to a
new bear-market-rally high, taking its gains to 12.4% in just
6 weeks. That was the fourth time last month central bank-
ers had rushed to rescue a stalling stock-market rally! The
USDX plunged 0.8% on Yellen’s uber-dovishness, helping
to catapult gold 1.9% higher to $1242. The HUI shot up by
6.2% on that, fully reversing the 23rd’s sharp losses.
Yellen’s easy-Fed rally went global on the 30th, with the
SSEC and DAX soaring 2.8% and 1.6%. But here in the US
the bear-market rally was still looking exhausted as the SPX
closed at +0.4%. Gold suffered an anomalous intraday sell-
off that could only be futures shorting, driving a 1.4% down
day. The HUI weathered this well though, off just 0.8%.
Considering the central-bank-conjured stock-market levi-
tation, gold weathered last month beautifully with its strong
high consolidation. Gold has long tended to grind sideways
in March seasonally ahead of a strong seasonal rally in April
and May. That pushed gold 4.3% higher on average in the
bull-market years between 2001 and 2012, resulting in the
HUI seeing excellent average gains of 13.7% between mid-
March and early June. And given the new bull markets and
flood of investor interest in gold and its miners’ stocks, odds
are this spring’s rally will prove outsized relative to those av-
erages. Gold is poised to start powering higher again.
APRIL 2016 PAGE 6/8
 Stock Speculative Investments and Speculations ing cash flows of $96.8m. For all of 2015, Tahoe’s AISC hit
China Gold (CGG-TSX) … Though China Gold’s month an amazing $9.11 per ounce for silver and $733 per ounce
was lackluster, its solid technical uptrend remains intact. Its for gold! Tahoe ended the year with $108.7m of cash. (Rec
rally ought to resume with the rest of the gold stocks. (Rec 2/16 @ $7.75 Now $10.03 +29% Stop $8.66 25%)
10/15 @ $1.90 Now $2.17 +14% Stop $1.88 25%) Eldorado Gold (EGO-NYSE) … Eldorado shot up early
Richmont Mines (RIC-NYSE) … Richmont was strong last month, and then retraced those gains. Its Q4 results
in March, advancing sharply before consolidating high. Like were released in late March. EGO produced 171.3k ozs of
most of the gold stocks, news was light to nonexistent in the gold at AISC of $914, resulting in $28.9m in operating cash
month before quarter-end which is typical marketwide. (Rec flows. Eldorado left 2015 with $292.6m of cash. (Rec 3/16
10/15 @ $2.76 Now $5.64 +104% Stop $4.36 25%) @ $3.00 Now $3.16 +5% Stop $2.79 25%)
OceanaGold (OGC-TSX) … OceanaGold also consoli- Pretium Resources (PVG-NYSE) … Pretium’s stock fol-
dated high after early-month gains. At the end of February, lowed the typical March pattern, up then back. A couple of
it reported that its new Haile mine is on schedule for running large investors gave Pretium a vote of confidence by exer-
ore by the end of this year. $240m of capital for this $380m cising rights to buy new shares proportionally to the offering
mine build had already been committed, nearly 2/3rds. Hai- that fully funded PVG’s fantastic Brucejack mine build. (Rec
le nearing production should attract in new investors. (Rec 3/16 @ $4.66 Now $5.35 +15% Stop $4.37 25%)
11/15 @ $2.50 Now $3.57 +43% Stop $3.14 25%) Primero Mining (PPP-NYSE) … Primero surged early in
Klondex Mines (KDX-TSX) … Klondex reported its Q4 March, but reversed with its sector. Like KGI, it saw super-
results in late March. It sold 33.6k gold-equivalent ounces high trading volume running 7.1x recent averages on March
at cash costs of $593 per ounce. This generated operating 18th. But once again there was no indication of why. (Rec
cash flows of $10.8m, leading to coffers of $59.1m at year- 3/16 @ $1.63 Now $1.81 +11% Stop $1.63 25%)
end. It continues to forecast production of 147.5k GE ozs in IAMGOLD (IAG-NYSE) … We need to reload IAMGOLD
2016, 11% growth. AISC of $875 are expected. (Rec 12/15 after that fluky stopping. It’s expecting to produce 785k ozs
@ $2.59 Now $3.47 +34% Stop $3.03 25%) of gold this year at AISC of $1050 per ounce. In addition it
Kirkland Lake Gold (KGI-TSX) … Kirkland Lake surged had $691m in cash at the end of 2015, a whopping 79% of
in early March, before retreating later on. It produced 27.6k its current market cap! IAG remains wildly undervalued.
ozs of gold in Q4, at AISC of $1006. That still generated (Rec 4/16 @ $2.21 Now $2.21 +0% Stop $1.66 25%)
operating cash flows of $11.4m. On March 18th, which was Silver Standard (SSRI-NASD) … Silver Standard is now
a flat day in gold and the HUI, KGI saw huge trading volume a primary gold miner forecasting 390k GE ozs of production
running 11.5x its 3-month average! KGI’s stock merely slid in 2016 at cash costs of $735 per ounce. This breaks down
1.5% on this, and I couldn’t track down its cause. (Rec 1/16 to about 265k ozs of gold thanks to its March acquisition of
@ $4.84 Now $8.37 +73% Stop $7.15 25%) Claude Resources, and 9m ozs of silver. SSRI’s stock has
Alacer Gold (ASR-TSX) … Alacer Gold suffered a weak major upside ahead as gold and silver continue to recover.
month despite no news. But it remains undervalued with its (Rec 4/16 @ $5.55 Now $5.55 +0% Stop $4.16 25%)
14.7x P/E, and should rally as gold stocks catch a bid. (Rec Stock-Options Speculations
2/16 @ $2.18 Now $2.35 +8% Stop $2.23 25%) GDX Jun 14 Calls … Gold stocks’ spring rally is ready to
B2Gold (BTG-NYSE) … B2Gold enjoyed a spectacular commence. (Rec 2/16 @ $1.64 Now $6.05 +269%)
month, rocketing higher! It reported a great Q4 mid-month, SPY Sep 193 Puts … Stock markets are on the verge of
with production climbing 18% YoY to a record 131.5k ozs of another selloff. (Rec 3/16 @ $11.95 Now $5.24 -56%)
gold. And that was at outstanding AISC of $807 per ounce, QQQ Sep 109 Puts … A stock downleg will pummel the
15% lower YoY. That generated OCF and year-end cash of lofty tech stocks. (Rec 4/16 @ $5.36 Now $5.36 +0%)
$48.5m and $85.1m. B2Gold reiterated its 2016 guidance
of 530k ozs of gold production at AISC of $910. (Rec 2/16
@ $0.75 Now $1.66 +121% Stop $1.33 25%)
IAMGOLD (IAG-NYSE) … We were stopped out of IAG Symb. Exch. Description Rec. Price Now Gain
not because it fell far, but because of an anomalous spike in Gold (coins) 1-oz bullion 5/01 $264.40 $1231.5 +366%
early March. On the 4th IAG’s stock rocketed up 7.8% on Silver (coins) US 90% bags 11/01 $4.20 $15.44 +268%
heavy volume, before closing down 6.6%! While that was a SSRI NASD Gold/silver 4/02 $2.92 $5.55 +90%
volatile day in the HUI thanks to Jobs Friday’s gold impact, GG NYSE Elite major gold 8/02 $8.12 $16.23 +100%
IAG’s reaction was really excessive. Our loose 25% trailing PAAS NASD Major silver 8/02 $6.10 $10.87 +78%
OXY NYSE Major US oil 12/05 $39.65 $68.43 +73%
stops can weather a lot of volatility, but sometimes they get
SCCO NYSE Major copper 2/06 $14.52 $27.71 +91%
dragged too high in intraday surges leading to a tripping.
EOG NYSE Major US oil 7/06 $34.67 $72.58 +109%
(Rec 2/16 @ $1.45 Stopped 3/9 @ $2.08 +43% FINAL) SLW NYSE Silver streamer 11/08 $3.60 $16.58 +361%
Tahoe Resources (TAHO-NYSE) … Tahoe had a great DGC TSX Mid-tier gold 8/15 $12.69 $20.45 +61%
month as silver investors finally started to return. It had a IAG NYSE Mid-tier gold 8/15 $1.52 $2.21 +45%
strong Q4, producing 5.5m ozs of silver generating operat- TAHO NYSE Mid- gold/silver 8/15 $8.13 $10.03 +23%
AG NYSE Major silver 10/15 $3.20 $6.48 +103%
Are you an active speculator? Would you prefer higher-resolu- OGC TSX Mid-tier gold 10/15 $1.95 $3.57 +83%
tion markets and trading analysis more often than once a month? BTG NYSE Mid-tier gold 11/15 $1.07 $1.66 +55%
And more trading opportunities? Subscribe today to our weekly EGO NYSE Mid-tier gold 2/16 $2.24 $3.16 +41%
Zeal Speculator newsletter! www.zealllc.com/speculator.htm NGD NYSE Mid-tier gold 3/16 $3.39 $3.73 +10%
ZEAL INTELLIGENCE WWW.ZEALLLC.COM © 2016 ZEAL LLC APRIL 2016 PAGE 7/8
 Fed ZIRP Savers’ Cost
Stock-Buyback Threats
Symb. Exch. Sector Risk Japan Elderly Crime
FM TSX Copper 5 The Fed’s zero-interest-rate policy that than 4%. That compares to average an-
SCCO NYSE Copper 5
was implemented in December 2008 has nual growth of 37% in the 5 years before
NSU NYSE Copper/Gold 5
been devastating for American savers. It that! By mid-March, Bloomberg reported
TRQ NYSE Copper/Gold 5
FCX NYSE Copper/Oil 7 destroyed interest rates’ free-market func- that Q1’16 buybacks were on pace to hit
AGI NYSE Gold 4 tion of fairly compensating those willing to $165b, which would challenge the record
AKG NYSE Gold 5 lend surplus capital (savings) while fairly from 2007. That was of course a cyclical-
AR TSX Gold 4 charging those wanting to borrow it. The bull-topping year rolling over into a brutal
BAA NYSE Gold 8 economic costs to savers of this outright cyclical bear that more than cut in half the
BSX TSX Gold 8 Fed war against them has been vast. I’ve SPX. Meanwhile in Q1’16, all the rest of
BVN NYSE Gold 5 been wondering how costly ZIRP proved investors including funds had pulled over
CG TSX Gold 4 for hard-working American savers. There $40b out of stocks by mid-March, on pace
CNL TSX Gold 7 is a Fed data series tracking total savings for a record quarterly withdrawal. Without
DGC TSX Gold 4 deposits in the US on a weekly basis. In those huge corporate stock buybacks, the
DPM TSX Gold 6 mid-March that number was up to $8.5t. I strong bear-market rally in the latter half
EDV TSX Gold 7 took this series and averaged the weekly of Q1 never could’ve happened. And that
GGD TSX Gold 7 balances annually for 2009 to 2015, the 7 is very ominous because there is a black-
GOLD NASD Gold 4 ZIRP years. ZIRP had an enormous neg- out period for stock buybacks leading into
GORO NYSE Gold 6
ative impact on savers’ returns, slashing quarterly earnings reporting. Companies
GSV NYSE Gold 8
the yields on savings account. If that was must suspend stock buybacks before they
GUY TSX Gold 6
KAM TSX.V Gold 7
2% over the past 7 years, if savings yields release their Q1 results. While the exact
LUG TSX Gold 7 were 2% lower than they otherwise would timing is company-specific depending on
MUX NYSE Gold 7 have been because of ZIRP, it cost Amer- their reporting date, this will still eliminate
NGD NYSE Gold 4 ican savers $878b. At 3%, 4%, and 5%, the majority of SPX-component buybacks
PG TSX Gold 6 these losses explode to $1317b, $1755b, from late March to early May. So April is
PRU TSX Gold 4 and $2194b! So the Fed effectively stole set up for a selloff without sufficient stock
ROG TSX.V Gold 6 somewhere between $0.9t and $2.2t from buybacks to offset all the other selling. It
SA NYSE Gold 7 American savers in the ZIRP era! That is will be exacerbated by all kinds of down-
SMF TSX Gold 4 a vast sum of wealth that would’ve made side surprises as companies warn on Q1,
TGZ TSX Gold 8 countless retirements far more secure, as miss on Q1 expectations, and downgrade
TXG TSX Gold 7 well as fuel much spending. And costs to 2016 guidance. As of late March, overall
FNV NYSE Gold Royalty 5 savers will continue to mount until the Fed corporate profits were expected to fall 8%
RGLD NASD Gold Royalty 6 finishes fully normalizing interest rates. in Q1 despite overvalued stock markets!
SAND NYSE Gold Royalty 4 US corporations have taken advantage Japan’s elderly are resorting to crime to
HL NYSE Gold/Silver 3 of ZIRP’s dirt-cheap money to make mas- offset their artificially-low incomes from
EPD NYSE OG Pipeline 7
sive stock buybacks driving both the bull ZIRP and NIRP. 35% of Japan shoplifting
ETE NYSE OG Pipeline 6
market of the ZIRP era and bear-market crimes are committed by people over 60,
NAT NYSE Oil Shipping 4
EPE NYSE Oil/Gas 7
rally since mid-February. SPX companies with 40% repeat offenders with more than
LPI NYSE Oil/Gas 7 have spent over $2t on stock buybacks in 6 charges! Shoplifting can earn a 2-year
OAS NYSE Oil/Gas 6 the years since 2009, most of it financed prison sentence, offering the elderly free
SYRG NYSE Oil/Gas 7 by debt. But the growth rate of buybacks food, shelter, and healthcare. With basic
AG NYSE Silver 5 is slowing, an ominous omen for the stock state pensions running US$6900 a year,
ASM NYSE Silver 5 bull they overwhelmingly fueled. In 2015, going to a low-security prison seems like
CDE NYSE Silver 6 the year the bull stalled, they grew at less an attractive option for Japan’s elderly.
EXK NYSE Silver 5 THE PARTING SHOT…
FSM NYSE Silver 6
MVG NYSE Silver 6
The markets’ setup for contrarians is exquisite today. Gold is poised for its usual big
PAAS NYSE Silver 4 spring seasonal rally after spending March consolidating high despite stock markets’
SLW NYSE Silver 2 bear rally being artificially extended by central banks. These lofty Fed-goosed stock
SMT TSX Silver 8 markets are heading into an ominous Q1 earnings season, where expectations are for
SVM TSX Silver 7 SPX component-company profits to fall around 8% YoY. That’s likely to unleash a big
TWTR NYSE Social Media 7 phalanx of guidance lowerings and outright misses, creating a sentiment minefield for
CCJ NYSE Uranium 7 traders. And with stock markets already trading near bubble valuations, lower profits
Risk 1-9, 9 High … ( More Info ) are exceedingly dangerous. On top of all this, corporate stock buybacks must cease
during the quiet period leading into earnings releases. They’ve been 2016’s dominant
ZEAL SUBSCRIBER CHARTS and often only source of stock demand. And the elite central banks will mostly be be-
www.zealllc.com/s/subs.htm tween policy meetings, lowering their potential for dovish surprises. Gold’s young bull
User name: dovish will resume as stock markets inevitably roll over, boosting demand for alternatives.
Password: orgy May God make His face shine upon you and your capital! Adam Hamilton ☺
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