| | |
|
 
Personal note:
Arguments for lower prices:
- 3-years downtrend: Overall Gold still is in a downtrend. US$1,525.00
remains the line in the sand. Gold will need much more time to break through
this heavy resistance. Only a move above US$1,390.00 and especially US$1,430.00
will indicate that the mid- and longer-term trend indeed has changed.
- Gold Monthly Chart: MACD sell signal active since November 2011
(this is extremely powerful and needs to change before one can really call
the bottom). It looks like MACD could create a buy signal within the next
1-2 months. RSI still below 50 and in bear market territory.
- Gold Weekly Chart: Gold failed to reach the blue triangle downtrend-line
around US$1,365.00 during its latest advance. MACD is choppy while stochastic
is in sell mode. Gold continues to move sideways and further into the blue
triangle. No bullish indication yet. The chart remains basically neutral.
- Gold Daily Chart: Gold had a big sell off from the top at US$1,346.80
two weeks ago. The short-term trend is down besides any whipsaw action. MACD
sell signal active.
- GLD: Still has an open gap around $122.70 to fill. This coincides
with Gold correcting back to around US$1,280.00.
- Gold Stocks: HUI has an open gap to fill around 227 points. Short-term
Gold Bugs sentiment has eased in recent days but still sitting at slightly
extreme optimism levels (70%). As well MACD & Stochastic sell signals
are active.
- CoT-Data: Commercial short position in Comex Gold Futures spiked
up to 156,906 contracts last week and is sitting around this level. Although
being still at low levels compared to other readings during this bull market
this does not look very healthy. Many mining companies have increased their
hedging due to difficult business environment, low Gold prices and high production
costs. This is an important development to watch in the future. As well bullish
bets on Silver have been at the highest levels in over three years.
- Physical demand: China's Gold imports via Hong Kong reached a 17-month
low in june. China's Gold demand decreased by 20% in the first six months
of 2014 while at the same time Chinese Gold production increased by 9%.
- US-Dollar: The dollar seems to be tracing out an inverted head & shoulder
bottoming pattern. A rallying dollar will not be friendly to the metals.
- Stock-market: The retail money market ratio is at lowest levels
since nearly 20 years showing that investors are fully committed to the markets.
Same analysis for the Rydex Money Market %. When traders are so optimistic
and sure of themselves that money market assets account for less than 40%
of total assets, then it usually coincides with a market peak. The conclusion
is that a deflationary crash might be looming which would not be good for
precious metals in the beginning. Only after central bankers start flooding
the market with even more liquidity the precious metals sector will outperform
all other asset classes....
- Baltic Dry Index: At
its lowest levels since 1986!
Arguments for higher prices:
- Higher Low: The up trend since the beginning of the year is still
valid. The correction during spring did not reach a new low below last December's
US$1,180.00. Instead Gold turned higher from US$1,240.20. This is extremely
positive because we now have a series of higher lows. The market will soon
want to figure out if the lower high at US$1,395.00 (from march) is still
valid.
- Gold Monthly log-Chart: Long term trend-line is intact and now around
US$1,255.00. Any move below US$1,250.00 is highly unlikely and would mean
the end of this secular bull market! As well MACD is about to create a powerful
long term buy signal.
- Gold Weekly Chart: Since May 2013 Gold is moving sideways between
US$1,180.00 and US$1,434.00. The current blue triangle should break within
the next 1-3 months. Resistance at US$1,360.00 and solid support around US$1,265.00.
The parabolic SAR indicator remains in buy mode until US$1,265.39 is taken
out. Weekly lower Bollinger Band at US$1,248.11 will be strong support too.
- Gold Daily Chart: Gold bounced off the 200-MA (US$1.286,95) and
the 50-MA (US$1,293.97). Both moving averages offer good support and running
basically sideways. Slow Stochastic is oversold while RSI has been neutralized
in the last two weeks. The huge sell off two weeks ago did not lead to a
follow through. Also note that besides all the bearish talk the gold bears
did not make any progress since more than one year!
- Gold/Silver Ratio: Currently at 62.92. Silver continues to be stronger
than Gold. The ratio is consolidating since early july and is barely holding
above an important up trend Any convincing close below 61.50 would confirm
a new rally in the precious metals sector. Short-term it looks like it could
continue to consolidate around its 200-MA (63.38).
- Gold-Stocks: According to www.goldstockanalyst.com Gold
Stocks are 37% undervalued and trading as if Gold was at US$839.00.
- Sentiment: Short-term sentiment is bullish with Kitco's weekly Gold
survey counting 63.6% bears. Long term sentiment for Gold still is close
to excessive pessimism.
- Inflation: US-inflation officially at 2.1% leading to a current
10-year real interest rate at 0.25%. With many geopolitical risks in
energy producing countries, oil and gas prices could quickly push inflation
rate higher. As soon as real interest rates turn negative again Gold and
especially Silver will start to sky rock.
- Seasonality: Best time of the year is starting now. After 3 years
with heavy corrections in autumn I think this year we could see a sustainable
rally into December. Statistically best months of the year are august, september
and november.
- Euro CoT-Data: Commercials have been building up a massive long
position. Sentiment is close to excessive pessimism. Therefore I do not expect
the Euro to crash although the chart does not look very good. Instead combined
with positive seasonality the Euro could surprise in the coming months. A
weaker US-Dollar should lift precious metals.
Conclusion:
- As always lots of data and lots of contradictory findings to digest. This
is the result of mass psychology, complex market structures and a never ending
stream of new developments. Welcome to the three-dimensional real time puzzle....
- My last analysis has been pretty accurate with Gold topping at US$1,346.80.
My short sell recommendation should have worked out very well. Four weeks
ago I also said we should see a summer low around US$1.270,00-US$1,280.00.
So far the lows came in last Thursday at US$1,286.95. On Friday afternoon
Gold recovered back towards US$1,308.50.
- Due to the very bearish short-term sentiment readings I think Gold should
have a few strong days next week. A recovery towards US$1,315.00 even US$1,330.00
might be possible. But I still doubt that this correction is already done.
Instead I'd like to see the HUI closing its open gap and Kitco posting another
survey with 60%+ bears.
- The last two weeks have been quite similar to last year's summer period.
Back then Gold had been dancing and whipsawing around the US$1,300.00 level
for around three weeks before a final sell-off took it down to US$1,273.00.
Exactly from there the bull run towards US$1,434.00 started.
- I don't see Gold falling below US$1,250.00. Only if the stock-markets are
crashing this becomes a possibility. Due to recent strength in Chinese stocks
this is not very likely at the moment.
- Swing traders need to be patient and avoid trading in this whipsaw environment.
Scaling in with limit buy orders between US$1,281.00 and US$1,265.00 should
be a promising recipe. Stops should be placed below US$1,240.00.
- Investors with a long-term perspective should have bought this week below
US$1,300.00 according to my last newsletter. They should continue to accumulate
physical Gold below US$1,285.00 and physical Silver below US$20,20.
Long term:
- Nothing has changed
- Precious Metals bull market continues and is moving step by step closer
to the final parabolic phase (could start in summer 2014 & last for 2-3
years or even longer)
- Price target DowJones/Gold Ratio ca. 1:1
- Price target Gold/Silver Ratio ca. 10:1
- Fundamentally, Gold should soon start the final 3rd phase of this long
term 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 evolving 3rd and finally parabolic stage
will end in the distribution to small inexperienced new investors who will
be subject to blind greed and frenzied panic.
| |
