1. Market Update
Since its recent low at $1,200 on May 30th gold posted a massive rally reaching $1,315 last Thursday. Since then gold has started to retrace back towards the February highs at $1,262. So far everything is within a normal pullback. But the probability for a larger pullback is certainly rising here. I think the gold market simple needs more time until it is finally ready to break out and start the rally towards $1,500 going. As I have already written a couple of times usually it takes a test of the 200MA (currently at $1,175 but rising every day) before the market is ready for the next leg up.
Regarding Brexit I guess it won't happen today. The globalist powers simply will not allow it. So if you need a fundamental explanation there currently is quite some fear-driven money in the gold market right now which will have to leave once its clear that Britain remains in the Eurozone. We should see a couple of volatile weeks trading between $1,200 and $1,300 before the market is ready. At least expect one final kiss to the zone of $1,200 to $1,215 until august...
At the same time the miners are still holding up very well and do not show any real signs of weakness. During the first year of a new bull market usually there won't be any pullbacks larger than 10-15%. Fortunately we had a great entry in Endeavour Silver which probably has the highest leverage on the silver price. The stock is still a buy on a any dip. Don't chase the miners here but remain patient.
The cryptocurrencies are going nuts these days. After its massive breakout out of the rising triangle formation Bitcoin nearly reached my 1st price target at around $800. I think the cryptocurrency sector is in a multiyear bull market and Bitcoin will take out the all-time high at $1,216 soon or later. We are in a winning trade here and just have to let our winnings run. But at the same time you have to be aware that this is not a one way ticket. On top many of those cryptocurrencies will not make it in the long run. The 50%-crash in Ether after hackers had stolen more than $40 Million (akin a modern form of bank robbery) shows the vulnerability of the new technology. It will take more time and more challenges but in the bigger scheme of things you could compare the situation with the crashes and panics in 1870 to 1880 during the founder's time of the industrial age. Now we are moving into the digital age and whether you like it or not, it is just a question of time until some form of digital money will be widely accepted.
2. Bitcoin - let your winnings run
Bitcoin is in a new bull-market and we are long since $372 which means unrealized gains of 78%. Now the tricky question is: how much room to breath do you want to give a soaring investment? You want to ride it as a long as possible while at the same time limit the amount of money you might leave on the table. For long-term investments I either like a 25% trailing stop ($580) or a stop strategy depending on the volatility (e.g. 3 times the average true range = $655). You can mix those two with technical support & resistance zones as well.
But Bitcoin could still test the breakout zone around $500 before taking off towards $1,000. So I am willing to give a lot of room here to make sure we stay in this trade. A pullback towards $565 is very likely and would present a first chance to buy more.
Action to take: Hold your bitcoins. Buy more below $575.
Stop Loss: Move your stop to $460 (end of the day stop)
Profit Target: $800 and $1,000
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 neutral since June 20th
Compared to my last public report two weeks ago we have four new bearish signals:
Gold USD - Daily Chart
Gold in Indian Rupee
Gold in Chinese Yuan
One element shifted to bullish:
Gold in USD - Weekly Chart
One signal moved to a neutral reading:
Gold in $, €, £, ¥
Overall the model takes a neutral stance and it looks like this will last for a couple of weeks. Only a move above $1,315 will change the picture.
4. Gold - more consolidation & dips before the rally towards $1,500
Gold still is sitting around its February high at $1,262. More than four months already our favorite precious metal is trading basically sideways trying to confuse everybody. With its recent failure at $1,315 I think this trendless period will continue for some more weeks. But the mantra remains to buy the dips below $1,215 as I am pretty sure we will get the start of the rally towards $1,500 later this summer.
The Brexit vote tomorrow will certainly bring more volatility but probably also a short-term disappointment for the gold bugs. If instead Britain indeed leaves the eurozone we should see gold quickly skyrocketing towards around $1,350 which remains the first target on the upside and would also call for profit taking. But technically gold has just broken down from the $1,280 neckline of a Head&Should pattern targeting $1,240 in the near term. From here we might get another rally towards $1,280. Overall I still believe that gold needs to test its rising 200MA (currently $1,175) around $1,200 this summer before we get the next leg up. Also I don't want to see gold below $1,165 anymore otherwise the bull thesis does get into serious trouble...
Action to take: Buy the VelocityShares 3xLong ETN (UGLD) below $10.50
Stop Loss: $8.50
Profit Target: $18.25
Timeframe: 8-10 months
Risk ($2.00) / Reward ($8.25) = 1 : 3,87 (pretty 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 $1,205 again. As well buy silver below $16,00. 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 & Watch list
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. Gold was able to push above the January 2015 high at $1,307 and we finally looking at a series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 - $1,530 and Silver towards $25.00 within the next 8-24 months.
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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