Update 19th of November 2013.
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.
- Since early May Gold is moving sideways within a large triangle. Generally speaking a triangle is a trend continuation pattern. Yesterday's move below US$1,275.00 indicates a breakout to the downside.
- A daily close below US$1,267.00 would confirm more downside pressure and could lead to the final stage of this multiyear correction.
- MACD sell signal on monthly chart still active (but MACD histogram is already turning higher from oversold levels...)
- Gold clearly trading below falling 50-MA (US$1,316.34) and below falling 200-MA (US$1,404.89).
- On the daily Silver chart the Slow Stochastic indicator is embedded. With both signal lines below 20 the bearish downtrend is locked in.
- Gold Silver Ratio still in an uptrend and currently at 62.54. Silver continues to be weaker than Gold.
- There is still a lot of insecurity in the gold market. It will take more time to create a new bull-trend.
- ETF Gold demand continues to be very weak. ETF holders have been selling nearly 9 tons of Gold in the last 6 days.
- Deflationary forces gaining power. The oil price is down more than 17.5% during the last 2.5 months. European Central Bank had to lower interest rates to fight recession in South-Europe.
Arguments for higher prices:
- Besides disappointing price action Gold is still holding it's series of higher lows since end of june.
- MACD buy signal & Slow Stochastic buy signal on the weekly Gold chart still active.
- A daily close above US1,300.00 brings the P&F-Chart back in bull mode.
- Until last week's low at US$1,261.00 Gold was down 10 of 11 trading session. This is a rare event and normally creates an important low followed by new uptrend.
- The downward momentum in the Gold mining sector is stalling. The Gold stocks slightly performed stronger than Gold and are still holding well above their october lows. GDX seems to be bottoming out here.
- Public Opinion data continues to show a slightly positive situation for Gold & Silver. Both metals are far away from excessive optimism. The sentiment for Gold stocks is neutral with the HUI Goldbugs Index holding barely at 50% bullishness (according to www.sentimenttrader.com). Generally the sentiment for the precious metals sector is in a depression.
- According to the latest CoT report the "commercials" are 65,785 contracts short on Gold. In the longer term historical context this is a very small short position.
- Seasonality from mid of November until end of the December is very positive.
- Commercials are net long on the Euro again. They used the bounce in the US-Dollar to cover their €-shorts. This is positive development for Gold & Silver and probably means that the US-Dollar bounce is already over.
- US-budget & debt ceiling theatre will start again in January.
- The Fed will have to continue with QE and might even increase it. Tapering is off the table.
- As Marc Faber put it: "Gold is bottoming out here. We have a lot of bearish sentiment and a lot of bearish commentaries about gold, but the fact is that prices are probably in the process of bottoming out here".
- Gold did not make it to US$1,375.00 but failed already at the strong resistance cluster around US$1,362.00. The upper Bollinger Band, the 50-MA and the 61.8% Fibonacci retracement stopped the bulls and Gold quickly moved back even below US$1,300.00. Last week Gold tested the uptrend with a low at US$1,260.50. Since then Gold has been slowly moving higher recovering some of the lost ground only to fall back again yesterday. A trend change looks different.
- Gold is hanging at important support and a decision is very close. Bulls are still able to defend US$1,270.00.
- A daily close below US$1,267.00 will clearly break the uptrend and should bring lower prices. This would also question the bottom building theory and increases the probability for a test of US$1,180.00. My worst case scenario remains a move down to US$1,050.00 although I think this will only happen in the paper Gold market. The physical market will become very tight at lower prices and should therefore see rising premiums.
- A breakout and daily close above US$1,293.00 instead brings new hopes for the bulls as the market will shift its focus to the upside. Prices above US$1,320.00 will signal that bulls gaining more control and that the bottom indeed is in place. This will activate US$1,360.00 and US$1,430.00 as the next price targets.
- Investors with a long term perspective should continue to accumulate physical Gold and Silver while they are still hated and cheap.
- 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.