• 275 days Could Crypto Overtake Traditional Investment?
  • 280 days Americans Still Quitting Jobs At Record Pace
  • 282 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 285 days Is The Dollar Too Strong?
  • 285 days Big Tech Disappoints Investors on Earnings Calls
  • 286 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 288 days China Is Quietly Trying To Distance Itself From Russia
  • 288 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 292 days Crypto Investors Won Big In 2021
  • 292 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 293 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 295 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 296 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 299 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 300 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 300 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 302 days Are NFTs About To Take Over Gaming?
  • 303 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 306 days What’s Causing Inflation In The United States?
  • 307 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Gold is Oversold but Broken

Last week we wrote that the 2016 bull market in Gold and gold stocks had gone off course. It had moved too far out of the historical boundaries to remain a bull market. There was also other evidence of such including but not limited to rising real yields. Gold's last hope was to hold $1200-$1210 and rebound back to the highs. It has broken bull market support ($1200-$1210 and $1230) and could be on its way to $1050 in the next few months.

The monthly candle chart of Gold is shown below. Gold is down 7.4% on the month and has sliced through the important support at $1200-$1210 as well as the 20-month moving average at $1201 and the 40-month moving average at $1231. The 40-month moving average has been an excellent primary trend indicator throughout Gold's history. There is a little support at $1150 but nothing standing in the way of Gold heading for a retest of its low at $1050.

Gold Monthly Chart

Gold is not only weak in nominal terms or US Dollar terms but it is showing weakness in real terms. Below we plot Gold against foreign currencies (the US Dollar basket) and the NYSE, a broad equity index. Gold/FC has been strong for several years but it has lost support and looks headed lower. Meanwhile, Gold/NYSE lost support at its 400-day moving average and could retest its 2015 low.

Gold:UDN and Gold:NYSE Daily Charts

Gold is clearly broken but its decline is due for a pause. Gold has been strongly correlated to the bond market which may have made an interim low last Wednesday. Also, the gold stocks are showing a positive divergence. Even as Gold lost $1200/oz and traded down to $1171/oz, the gold stocks (GDX, GDXJ) did not make a new low. Furthermore, the market has now fully priced in a quarter point rate hike in December.

The odds favor a rebound in the days and potentially weeks ahead. Traders and investors should use the rebound to de-risk their portfolios, raise cash and hedge if the opportunity presents itself. Don't think about buying until we see sub $1080 Gold and an extreme oversold condition coupled with uber bearish sentiment.

 


For professional guidance in riding the bull market in Gold, consider learning more about our premium service including our favorite junior miners for 2017.

 

Back to homepage

Leave a comment

Leave a comment