1. Market Update
We finally got the first dip in gold. Last week was an excellent chance to buy according to my mantra "buy the dip between $1,215 and $1,180". Unfortunately our limit for silver was missed by just $0.02. As well our limit for UGLD was not reached. But we were very lucky with Endeavour Silver. I hope you followed my recommendation to buy with a limit of $2.90. We got in right at the bottom and are up already 20%.
Gold's underlying strength is obvious. We are very likely in a new bull market. Last week's low could have already been the summer low. I am not sure about that. We simply continue to buy low and sell high.
But looking ahead towards the next couple of weeks we might be in for some serious liquidity crisis and turmoil with crazy volatility and falling prices in all asset classes. Why, because we're facing various potential shock events. The FED might raise interest rates, the British might vote for the Brexit, Spain might face a massive political shift in the coming election and the european football championship in France could see some nasty terror attacks. The outcome of all these events is very uncertain and each one could bring short-term havoc into the markets. Therefore I recommend to keep as much liquidity as possible. Stay out of bonds and stocks. If we're lucky our limits will get filled in a final panic sell off in the precious metals sector. Otherwise we're already well positioned for the next leg up and will buy more once the dust has settled.
Regarding bitcoin the expected breakout has finally happened. Bitcoin is exploding and we're up 53%! The cryptocurrencies are getting more and more exciting and gaining traction all over the world. Let your winnings run!
2. Bitcoin - finally the massive long expected breakout
Since the top in early November at $500 Bitcoin has been in a large consolidation. I have often written about this rising triangle formation and the massive potential. Now the breakout has finally happened and the price for one bitcoin surged fast and furious to nearly $600. Our position is nicely up and we just have to let our winnings run. Of course, bitcoin is short-term overbought and it is not wise to chase the cryptocurrency here. We might get a pullback in the next couple of weeks or months which could lead to a test of the breakout level around $480-$500. Should we get such a pullback you should add to your positions or start buying bitcoins for the first time.
Action to take: Hold your Bitcoins. Don't buy here but only below $495.
Stopp Loss: Move your stop to $450 (end of the day stop)
Profit Target: $800
Timeframe 6 -18 months
Initial Risk($80) / Reward($430) = 1 : 5.4 (very good ratio!!)
Position Sizing: Don't risk more than 1% of your equity.
3. The Midas Touch Gold Model bullish since June 3rd
Last Friday gold finally did bounce as expected two weeks ago. Within 7 minutes gold jumped from $1,212 to $1,237. The massive move shifted my Gold Model from bearish to bullish.
Compared to my last public report two weeks ago we have one new bearish signal:
Gold in $, €, £, ¥
Seven elements shifted to bullish:
Gold in USD - Weekly Chart
Gold Volatility - CBOE Index
Gold in Indian Rupee
Gold in Chinese Yuan
GDX Goldminers - Daily Chart
US-Dollar - Daily Chart
US Real Interest Rate
It will likely need a move back below $1,200 to switch the model to a bearish summary. Otherwise the bulls now have lots of signals in favor for them and might be able to push gold at least towards $1,262.
4. Gold - final sell off, prolonged consolidation or new up-cycle?
Gold has been falling from $1,303 down to $1,200 recently. For many weeks I've recommended to buy the dip into $1,215 - $1,180. So last week you had your chance. I am personally still not convinced that gold is ready for the next leg up but it is acting very strong and continues to hold above $1,200. My model has turned bullish and usually the model is right and I am wrong.. ;-) So here are the potential scenarios:
- More sideways consolidation above/around $1,200 over the next couple of weeks until 200MA ($1,266) is hitting $1,200. That might take some more time.
- Final sell off down towards the rising 200MA ($1,166) which would get everybody panicking and would create an outstanding entry chance.
- The lows are already in and once gold takes out $1,262 the next target around $1,345 will be approached rather quickly.
Let's see how the market behaves. As you know we have to buy low so I am not chasing gold here but remain patient. We had a great chance last week already.
Action to take: Wait until you can buy the VelocityShares 3xLong ETN (UGLD) below $10.00
Stop Loss: $8.50
Profit Target: $18.25
Timeframe: 8-10 months
Risk ($1.50) / Reward ($8.25) = 1 : 5,5 (very good ratio)
Position Sizing: Don't risk more than 1% of your equity
Investors should buy physical gold with both hands if prices move below $1,190 again. As well buy silver below $15,80. Buy both metals until you have at least 10% of your net-worth in physical gold and silver. But do not over expose yourself neither. 25% of your net worth should be the absolute maximum. If you want to be more aggressive put 2/3 into silver and 1/3 into gold.
5. Portfolio & Watchlist
6. Long-term personal beliefs (my bias)
Officially Gold is still in a bear market but the big picture has massively improved and the lows are very likely in. If Gold can take out $1,307 we finally have a new series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 within 1-3 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.
Bitcoin could become the "new money" for the digital 21st century. It is free market money but surely politicians and central bankers will thrive to regulate it soon.
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