Arguments for lower prices:
In April gold finally broke down from huge descending triangle and out
of 2 year sideways zone. The old support between US$1,520.00 and US$1,540.00
now is massive resistance. It will take more time to regain this level.
Still valid MACD sell signal on monthly chart
Gold still in well defined downtrend
If gold falls below monday´s low around US$1,340.00 we should see
a test of US1,320.00 followed by a break of the multiyear uptrend. Already
hourly close below US$1,359.00 would be critical.
Arguments for higher prices:
Last three trading days have been extremely volatile with huge moves to
both sides incl. shortsqueezes and reversals.... But so far US$1,340.00
has not been violated. Gold is producing first series of higher lows and
Potential W-formation shapping in gold. Confirmed if gold closes above
New low in HUI Goldmining-Index has not been confirmed by various indicators
CoT Data for gold and silver extremely positive: Commercial Short Position
at low levels last seen during deflationary crash in 2008. Small speculators
are net short on gold for the first time. CoT-Data for Platin are neutral
while for palladium they remain negative.
Sentiment continues to be at oversold extremes (Gold Public Opinion & Hulbert
Gold still at multiyear lows, Central Fund of Canada trading below net
asset value). A contrarian buy.
Gold demand from china during 1st quarter 2013 is up 20% compared to last
Physical gold market seems to be detached from paper speculation. ETF
sales responsible for falling goldprice while worldwide physical market
Japan potentially very very dangerous for world markets. The yield on
10-year japanese treasures is exploding. Huge derivates market could be
on the verge of blowing up and might affect equities everywhere. The moneyprinting
in japan is a lot of fun in the shortterm but when it stops working it
will create a disaster… This morning Nikkei was down 2000 points
(ca.12.5%) from yesterday´s high!!!!
QE in US does not solve any problems. Right now there is a lot of speculation
in the stockmarket. The S&P 500 is trading near a 52-week high and
over 90% of its components are above their 200-day moving average. This
shows a high degree of participation and points out to euphoria. The Hulbert
Stock Sentiment is clearly at an extreme suggesting that a substantial
correction is looming. On top we are entering a seasonal cycle which typically
brings corrections and/or consolidations (sell in may).
The Fed itself has become the greatest source of market instability and
Escalation in Syria/Israel. Situation in middle east could easily explode.
According to Mohamed A. El-Erian from Pimpco, the world is engaged
in four historic and unprecedented policy experiments:
- China, where the new leadership is managing a shift from an increasingly
less-potent mercantilist growth model to one based on internal demand,
while seeking to deliver it while maintaining high growth rates;
- Europe, where governments (with the help of the European Central Bank)
are trying to complete an imperfect economic union in the midst of a
recession, alarmingly high unemployment (especially among the young),
analytical disagreements and political tensions;
- Japan, where the new government of Prime Minister Abe has embarked
on the country's boldest post-war economic experiment, deploying the "three
arrows" of highly unconventional monetary policy, aggressive fiscal
expansion and (still to come) fundamental structural reforms; and
- The United States, where the Federal Reserve is trying to deliver growth
and jobs using partial and imperfect measures, and doing so without the
proper support of other policy agencies that are paralyzed by Congressional
Instead of challenging the broken support around US$1,525.00
gold sold off during the last two weeks. After 7 consecutive days of
falling prices gold reached a shortterm bottom monday morning in asian
trading session at US$1,340.00. From here gold exploded higher but so
far could not hold above US$1,400.00. I interprete the extremly high
volatility as a sign that gold is bottoming out.
At the same time it looks like stockmarket correction finally
has started. This means "risk off" for stocks and could lead
to a flight into safe haven gold.
If gold can close above US$1,400.00 we would have a
first positive signal that this multi-month correction is over. This
would open the door for a rally up to US$1,440.00 and US$1,485.00. Even
US$1,525.00 is possible within the next two months.
Nothing has changed
Precious Metals bullmarket continues and is moving step by step closer
to the final parabolic phase (could start in autumn 2013 & last for
2-3 years or maybe later)
Price target DowJones/Gold Ratio ca. 1:1
Price target Gold/Silver Ratio ca. 10:1
Fundamentally, Gold is still in 2nd phase of this long term bullmarket.
1st stage saw the miners closing their hedgebooks, 2nd stage is continously presenting
us news about institutions and central banks buying or repatriating gold.
3rd and finally parabolic stage will bring the distribution to small unexperienced
new investors who then will be acting in blind panic.