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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

1. Market Update

During the last two weeks Gold first continued to slide down towards the big psychological number of $1,000. It seemed to be just a question of a couple more down days before Gold finally would reach this long term target. Yet on December the 3rd Gold became very oversold while the CoT-Data already signaled that the commercial traders had reduced their short positions to record low levels. At the same time the Euro blasted massively higher due to short covering. In the following two days Gold had to catch up and last Friday Gold posted a massive short squeeze too. So far this is only a technical reaction and an oversold bounce. There is zero confirmation that we have already seen the final low in the Gold-market Instead it looks like we are in for another round of tricky recovery and misleading price action.

The positive news are that the miners and silver continue to hold up better.


Bitcoin is sitting just below the $400 level. After the parabolic high at $420 on November 4th, prices quickly reacted back towards $302, followed by a multi week sideways consolidation between roughly $320 and $340.

Since early December Bitcoin is on the move again currently attacking the $400 level. If the support zone around $375 can hold there is a high probability that we are going to see a breakout above $420 in the coming 1-2 months. If you still doubt the new up trend take the time to watch this video Het Bitcoin-evang.

Gold Point and Figure Chart

The point & figure chart for Gold is now on a buy signal. It will switch to sell signal if Gold closes below $1,050.

Daily Gold Chart

The GDX continues to hold up better than GLD. At the final bottom you want to see the miners ETF positively diverging from the physical Gold.

2. The Midas Touch Gold Model

Midal Touch Gold Model

Compared to last week we have the following changes: Lots of new buy signals from the Gold USD-Daily Chart, Ratio Gold/Oil, Ratio Gold/Commodities, Gold in Indian Rupee, Gold in Chinese Yuan, GDX Goldmines-Daily Chart, US-Dollar-Daily Chart and US Real Interest Rate.

But Gold Seasonality is on a sell signal until last week of December. The SPDR Gold Trust continues to see significant outflows.

Overall the model is now in Buy/Bull Mode signaling that Gold might be able to start a recovery in the weeks ahead.

3. Gold Daily Chart

Daily Gold Chart 2

Gold can do two things from here:

Either we're getting another recovery/bear-market rally or Gold will resume the downtrend rather soon.

The first case is supported by extreme pessimistic sentiment and the very bullish CoT numbers. As well my model is pointing towards this direction. A first target would be the resistance around $1,105. But everything below this number is just short-term noise and does not really improve the bearish picture. With a daily close above $1,105 the bulls should be able to use the positive seasonality starting end of December for a larger rally towards $1,140 and the 200-MA currently at $1,151.

On the other hand the bears need a daily close below $1,064 to regain control. We're not far away from this number. The remaining downside risk is approximately $50.00-$70.00 and I continue to expect the finally low between $980 and $1,035.

Overall we are facing limited downside risk but the bear market could extend in time yet we are getting very close to a huge opportunity in the gold market on the long side!! Remain patient but alert and do your homework to be ready once we are hitting $1,025.

4. Recommendations:

Swing-traders who followed my recommendation to sell Gold short between $1,175 - $ 1,180 should now move their stops to $1,085. You might be able to ride this winning trade down to $1,025 where you should cover everything.

As well I recommend to place a multiple scale in "Gold long" order between $1,035 and $980. E.g. 1/4 @ $1,035, 1/4 @ $1,020, 1/4 @ $1,005 and 1/4 @ $985.

Investors finally got a chance to buy physical Gold below $1,050 last week. Continue to buy with both hands if Gold moves below $1,050 again until you have 10% of your net worth in physical Gold and Silver.

5. Long-term personal beliefs (my bias)

Gold is in a bear market and headed towards $1,035 - $980. Once this bear is over a new bull-market should start and push Gold towards $1,500 within 2-3 years.

My long-term price target for the DowJones/Gold-Ratio remains around 1:1. and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold remains around US$5,000 to US$8,900 per ounce within the next 5-8 years ((depending on how much money will be printed..).

Fundamentally, as soon as the current bear market is over, Gold should start the final 3rd phase of this long-term secular bull market. 1st stage saw the miners closing their hedge books, the 2nd stage continuously presented us news about institutions and central banks buying or repatriating gold. The coming 3rd and finally parabolic stage will end in the distribution to small inexperienced new traders & investors who will be subject to blind greed and frenzied panic.


If you like to get regular updates on this model and gold you can subscribe to my free newsletter here: http://bit.ly/1EUdt2K


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