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One Belt, One Road, One Direction for Precious Metals

One Belt, One Road, One Direction for Precious Metals

China's launch several years ago…

GLD May Not Yet Be Ready To Break Out

GLD May Not Yet Be Ready To Break Out

While I have gone on…

U.S. Dollar Bull and Bear Markets

U.S. Dollar Bull and Bear Markets

The idea of endlessly repeated…

Gold and Silver

Update 25th of August 2013

Gold Weekly Chart

Gold Daily Chart


Arguments for lower prices:

  • Gold overall still in a downtrend. US$1,525.00 is the line in the sand. Gold will need much more time to break through this heavy resistance.
  • MACD sell signal on monthly chart still active.
  • Gold reached upper Bollinger Band (US$1.398.05) on Friday.
  • Gold overbought after US$130.00 rally in the last 3 weeks.
  • HUI not confirming new highs on Friday.
  • Excessive optimism in HUI Gold Bugs sentiment according to latest sentiment report. This fits well with many extremely bullish statements during last week.. e.g. technical gold trader Gary Savage expects "US$1,500.00 within next 2 weeks".
  • US-Dollar at very important support that might hold (at least short term).
  • Current stock market situation smells like 1987. If stock markets start crashing precious metals might get into troubles as well.
  • Last week of August and first week of September seasonal cycle is typically down for Gold and Silver.


Arguments for higher prices:

  • Gold's slow stochastic indicator on the daily chart embedded (both lines above 80), up trend is locked in.
  • Gold is above 50-MA (US$1,306.91) for the first time since october 2012. Next target automatically and naturally is the 200-MA (US$1,513.24). Over the next couple of months gold will test this important moving average.
  • Gold jumped over the lower downtrend line. Next target is upper downtrend line and new up trend
  • MACD buy signal active on daily & weekly chart.
  • CoT-Data for Comex Gold: commercial short position still very low.
  • The seasonal cycle for precious metals remains extremely positive until end of September
  • Dollar might break through important support line (80,50) soon
  • Treasury yields rising strongly. A bigger spike in 3-month U.S. treasury yields would create a big credit crunch and precious metals could become safe haven.


Conclusion:

  • As expected in my last analysis Gold needed more time to break through heavy resistance around US$1,345.00. During the last three weeks precious metals & mining stocks finally exploded higher. With silver being up nearly US$4,95 (= 25,9%) in just 13 trading sessions, this is not the time to chase the metals. A correction will come soon or later. That will be the perfect moment to build up long positions for anybody who is not yet invested. Patience as always is king.
  • I can see 3 short-term scenarios for the gold-market:
    1. Gold will continue to run up directly towards US$1,430.00 within the next couple of days followed by a 2 week volatile consolidation/correction around US$1,400.00. After that Gold should blast higher towards next big resistance around US$1,485.00 until end of September.
    2. Gold could already start to correct on Monday/Tuesday. This would fit well with the seasonal cycle for the last week of August & first week of September. I also think that US$1,345.00 still needs to be tested for support. With that type of correction Gold should gain enough strength to blast through US$1,400.00 and rise towards US$1,480.00 until end of September.
    3. Alternatively Gold continues to run higher towards US$1,500.00 without any correction until mid/end of September. Although the chart is strongly bullish and a new up trend is in place I would rate this scenario as unlikely because there is a lot of strong resistance waiting. But the market will tell us.
  • All 3 scenarios favor higher prices until end of September!
  • Don't forget that this is a recovery rally and we are coming out of a very long bear phase. The sustainable "rocket to the moon" moves will come when Gold is making new all time highs. I suggest reviewing Gold's price action after bottoming out in November 2008 to get an idea what to expect on the way back to and above US$1,525.00 within the next 6-8 months.
  • The probability is very high that we have seen the final low for this 2 year-correction in Gold at US$1,180.00. Next important zone is the strong resistance around US$1,525.00. Gold is a strong sell on the first two attempts to get over this level. The third or fourth attack should be successful but should not happen before early 2014. I do not expect any new all time highs in gold before summer/autumn 2014.

  • Long term:

    • Nothing has changed
    • Precious Metals bull market continues and is moving step by step closer to the final parabolic phase (could start in summer 2014 & last for 2-3 years or maybe later)
    • Price target DowJones/Gold Ratio ca. 1:1
    • Price target Gold/Silver Ratio ca. 10:1
    • Fundamentally, Gold is now starting to move into the final 3rd phase of this long term bull market 1st stage saw the miners closing their hedge books, 2nd stage continuously presented us news about institutions and central banks buying or repatriating gold. 3rd and finally parabolic stage will bring the distribution to small inexperienced new investors who will be acting in blind greed and panic.

     

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