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Signs of the Times

Signs of the Times

We have been watching for…

The End Is Near

The End Is Near

The doomsayers have been calling…

GLD May Not Yet Be Ready To Break Out

GLD May Not Yet Be Ready To Break Out

While I have gone on…

Florian Grummes

Florian Grummes

Florian Grummes is studying and trading the Gold market since 2003. Parallel to his trading business he is also a very creative & successful composer,…

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Gold and Silver

Update 25th of September 2013

Monthly Gold Chart 1994-2013

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.
  • MACD sell signal on the daily chart active since early September.
  • HUI Gold Bugs Index did not confirm Gold's recent high at US$1,432.00.
  • Seasonality: Bear market years in Gold tend to mute the rally attempts in autumn.
  • ETF Gold demand continues to be very weak.
  • Indian Gold imports have been falling by 20% since end of July. As well Gold demand in Dubai is dramatically lower. The indian government continues to fight against Gold.
  • Despite a weak US-Dollar and positive seasonality Gold is not able to rally.
  • US & european stock markets are looking toppy and in distribution mode. My gut feelings says that deflationary forces are getting stronger. If stock markets start crashing precious metals might get into troubles as well ("all the same markets", "risk off trade").


Arguments for higher prices:

  • Higher lows on the weekly Gold chart.
  • MACD buy signal on the weekly Gold chart still active.
  • Next target remains the 200-MA (US$1,475.77).
  • Gold's daily chart still with potential new up trend and 4 waves since the june lows. In this case wave 4 currently is about to finish. Wave 5 (in commodities often the sharpest one) could take Gold towards US$1,500.00.
  • CoT-Data for Comex Gold: commercial short position still very low and therefore bullish.
  • Fairly big drop in sentiment towards Gold and Silver. Both are now in negative sentiment territory once again. Sentiment data for Gold Stocks shows excessive pessimism.
  • The seasonal cycle for precious metals remains up until end of September.
  • According to the IWF central banks in Turkey (23 tons), Russia (12.7 tons), Ukraine (2 tons), Azerbaijan (2 tons) and Kazakhstan (2 tons) haven been buying Gold in august.
  • Chinese "Golden week" starts next Tuesday and might attract lots of Chinese jewelry buyers.
  • New agreement in India might reduce the import stagnation right in front of strong demand due to the upcoming indian wedding season.
  • New strikes in South Africa (Anglo American Platinum) threatens mining output (especially platinum).
  • US-Dollar trading below its 50-MA (81.67) and below its 200-MA (81.74). As well a death cross just occurred on the daily US-Dollar chart. A weak US-Dollar normally pushes Gold higher.
  • Upcoming US-budget battle. If there's no resolution debt rating agencies will threaten to lower the US bond rating. Gold might be able to benefit from this mess.
  • The Fed's maintenance of its current course will result in the US-Dollar continuing to bleed and this will feed through into accelerating inflation in the US.


Conclusion:

  • My last analysis has been wrong, as Gold was not able to hold above important support around US$1,355.00. Instead Gold sold off sharply in front of last week's FED meeting. The lows came in around US$1,291.00. Minutes before the FED's statement Gold started to move higher again and finally staged an impressive short covering rally up to US$1,375.00.
  • The fact that this rally has been nearly completely sold off in recent days is very negative and bearish. The Gold market seems to be confused at the moment and price action is somehow muted.
  • Another move below US$1,310.00 should trigger a sell off down to US$1,270.00. At the same time there is fear and widespread pessimism in the precious metals sector and a bottom could be close.
  • I think traders should stand at the sideline and wait until the picture gets more clear. We might get a new buying signal in Gold soon.
  • As long as Gold is not falling below US$1,270.00 the probability remains very high that we have seen the final low for this 2 year-correction in Gold at US$1,180.00 on June 28th. Next important zone is the strong resistance around US$1,525.00. Gold is a strong trading 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.
  • If Gold is breaking below US$1,270.00 bear market will continue and US$1,050.00 becomes next target.
  • I do not expect any new all-time high in Gold before summer/autumn 2014. Long Term chart suggest that it will take even more time.


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. The evolving 3rd and finally parabolic stage will end in the distribution to small inexperienced new investors who will be subject to blind greed and frenzied panic.

 

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