• 3 hours The Top Tech Stocks Of The Year
  • 18 hours America’s Workforce Elderly Workforce To Double By 2028
  • 24 hours Toyota Tests Solar-Powered Prius
  • 2 days Why The Gold Rally Flatlined
  • 2 days The Uranium Sector Can’t Catch A Break
  • 3 days Upcoming Fed Meeting Has Investors On Edge
  • 3 days Global Gold Sector Outlines Responsible Mining Principles
  • 4 days China’s Giant Vampire Fund Loses $120B
  • 4 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 4 days Savvy Investors Are Betting Big On This Little Data Company
  • 5 days How The Government Is Wasting Tax Money This Year
  • 5 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 5 days The World’s Biggest IPO Is Almost Here
  • 6 days The Relatively Of Money And Happiness
  • 6 days Wall Street Unfazed By Recession Fears
  • 6 days SoftBank Urges WeWork To Pause IPO Plans
  • 7 days Anti-Aging Market To Hit $55 Billion
  • 7 days JPM, Morgan Stanley Take Advisory Roles In Aramco IPO
  • 7 days Are Bonds In A Bubble?
  • 8 days The Unknown Media Giant Taking The World By Storm
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Gold Market Update

Originally published July 5th, 2015.

Gold has not even been able to muster a rally on the Greek crisis, which is a bad sign, especially as the dollar looks like it is preparing to break out upside from a large consolidation pattern.

On its 8-year chart we can see that gold is still in the large downsloping consolidation pattern that has been going on for 2 years now. Goldbugs like to think that this trading range is a pattern is a base pattern, and while it may be, this is viewed as wishful thinking. Instead it looks like the B-wave of a large A-B-C correction from gold's highs in 2011. If it is, then the C-wave, which is suspected to be imminent, will take gold down at least to the strong support in the $1000 area, and probably lower towards the lower boundary of its large downtrend channel shown - if it gets there we are looking at $850 - $870. The good news is that this should mark the end of gold's bearmarket, especially as a rising rate cycle is just over the horizon, and contrary to popular belief, gold thrives in a rising rate environment - anyone remember the late 70's??

Gold 8-Year Chart

The 6-month chart, which is of limited use technically, shows us recent action in more detail. Action on this chart is generally bearish, although on the positive side, gold put in a bull hammer on Thursday, and the last two times it did that, at the end of April and early in June, a short-term rally followed. Overall though, this chart looks negative, especially as the price is quite closely bunched with its principal moving averages, which are in bearish alignment, suggesting that even if we see a minor short-term rally, a breakdown and quite steep decline is likely to follow.

Gold 6-Month Chart

Gold's latest COT is in middling ground and thus provides limited guidance. Note that this chart lacks last week's update, probably because it has been delayed by Friday being a public holiday in the US. It will be updated after the latest data becomes available.

Gold COT

The Gold Hedger's chart is in middling ground and doesn't give us much of a clue about direction, one way or the other.

Gold Hedgers Position
Chart courtesy of www.sentimentrader.com

The latest Gold Optix chart looks bullish. This won't stop gold from dropping as it can get even more bullish on a drop, but what this and the Rydex Precious Metals Assets chart, which follows, do tell us is that we are probably not too far from a major bottom here.

Gold Optix
Chart courtesy of www.sentimentrader.com

The Rydex Precious Metals Assets chart certainly looks bullish and warns us not to get too bearish, even though we are expecting a drop over the medium-term, and also to keep a keep a close eye out either for convincing signs of a final bottom or evidence that a major new uptrend is starting, such as an upside breakout on strong volume from the major downtrend currently still in force.

Rydex Precious Metals Assets
Chart courtesy of www.sentimentrader.com

A big reason for expecting gold and silver to drop sharply to lower levels over the medium-term is the outlook for the dollar. The dollar is currently completing a Symmetrical Triangle pattern, which could be either a continuation pattern or a top. The point at which this Triangle has formed, some away above a still rising 200-day moving average, suggests that it is going to break out upside and embark on another major upleg, and it is not hard to see why, since the dollar index is comprised largely of the euro, and the euro is on the ropes, whichever way the Greek vote goes, after its countertrend relief rally of the past couple of months.

US Dollar Index 13-Month Chart

Conclusion: gold and silver look like they are consolidating within their downtrends ahead of another sharp drop, which is expected to synchronize with another dollar upleg. Over the longer-term, and contrary to general expectations, a mega bullmarket is expected to be ignited by a new cycle of rising rates, as in the late 70's, which will devastate the inflated bond and stockmarkets.

 

Back to homepage

Leave a comment

Leave a comment