1. Market Update
During the last three weeks gold broke out to the upside and posted a sharp
rally until $1,303 missing the January 2015 high only marginally. Since then
prices have come back down to $1,257 retracing all of the previous gains. Overall
the bulls remain in control and gold could still rally towards $1,333 - 1,355
before the first wave up is finally finished. In a new bull market gold will
stay overbought much longer than anyone can imagine. But sooner or later the
laws of gravitation and regression will force the corrective second wave down.
Since gold is acting strong but making no progress overall since February it
is very likely that we won't see prices below $1,180 anymore. In fact I see
$1,180 - $1,215 as the zone where a pullback/dip should already end. This means
the important 200MA ($1,156) will need quite some more time before it can act
as massive support in this zone.
The gold- and silver-miners had a spectacular start into 2016. Some of them
exploded more than 300% and 400% after being beaten down for nearly five years.
Although it might be tempting to chase this sector the reality will bring us
a pullback sooner or later. This dip will offer a great opportunity cause this
sector has a long way to go up. I will present the first mining recommendation
today and plan to add more during the next couple of months.
Despite many discussions about Bitcoin, the cryptocurrency is holding up very
well and is consolidating the breakout above the downtrend-line for nearly
three weeks now. I continue to think that the up trend will push Bitcoin towards
$480-$500 in the next one or two months.
Now that "sell in may" has arrived and the US-Dollar is recovering as expected
there is no need to chase any market. Instead let's be patient and wait for
the inevitable pullback in gold, silver and the miners.
2. Bitcoin - in a consolidation but $500 is very likely
Since the dynamic breakout above the downtrend-line and the spike towards
$470 Bitcoin is in a consolidation for 19 days now. The bulls are still in
control. The Bollinger Bands are moving sideways and pressure is building.
Therefore soon or later we will get a big move here. I continue to believe
that $500 is the next target. A breakout above this resistance zone will activate
$800 as a mid-term target.
On the downside Bitcoin is very well supported with the 50MA ($438), the lower
Bollinger Band ($442) and the 200MA ($408).The up trend since November is already
coming in at $441.To avoid of being stopped out in the noise we keep our stop
@ $410.
Action to take: Hold your Bitcoins and let your winnings run. Don't buy here.
Stop Loss: Keep your stop at $410
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 neutral since May 9th
My Gold Model quickly jumped to a Buy Signal on April, 28th. Yet two weeks
later it flipped back to a Neutral Signal.
Compared to my last public report we have two new bullish signals:
SPDR Gold Trust Holdings
Gold in $, €, £, ¥
Six new bearish signals are coming from:
Gold in USD - Daily Chart
Gold Seasonality May
Gold in Indian Rupee
Gold in Chinese Yuan
GDX Gold miners - Daily Chart
US-Dollar - Daily Chart
My model is neutral again. It will probably need a push above $1,295 in gold
to get back into full Bull Mode.
4. Gold not convincing but still strong
While the general markets are ruled by uncertainty these days gold leaves
a somewhat mixed impression. On the one hand prices managed to climb all the
way up to $1,303 missing the January 2015 high only marginally. The following
pullback towards $1,257 has met immediate demand and the ETF investors have
added more than 47 tones of gold during the last two weeks to their vaults.
This high physical demand in combination with the newly established Chinese
gold-fixing has likely prevented any larger pullback. Actually since February
we have not witnessed any of these waterfall sell offs in the gold market anymore.
The only thing missing is a higher high above $1,307 to confirm that gold indeed
is in a new bull-market. Personally I believe we are already on the way towards
$1,500 but should get at least one or two larger pullbacks before gold is hitting
this big horizontal resistance.
The bears might argue that Gold is basically still sitting at its February
high around $1,262 and did not make any progress over the last three months.
Looking at the extreme negative CoT-numbers and the ETF demand one can only
wonder how much "new" speculative money is on board of the gold train now.
It's still a small market and once everybody wants or needs to get out you
will get this waterfall sell off again. But so far the CME Group has not raised
the margin levels for gold futures and neither has the unfavorable seasonal
cycle stopped the bulls.
Looking at the chart another run towards $1,300 is confirmed if gold can push
above $1,280/1,285. This could happen within the next couple of days or after
another brief intraday test of the 50MA ($1,249). A breakout above $1,285 would
turn the current consolidation into a bull flag. In that case the odds for
powerful rally towards $1,333 - $1,355 do increase dramatically. In fact this
target zone should then be met rather soon and fast, marking the end of the
first wave up from $1,046. It should be followed by a larger pullback towards
$1,180 - $1,215. As long as gold can hold above $1,262 on a daily and especially
on a weekly basis this bullish scenario has an increased probability. Note
that if gold disregards the seasonal cycle now we might get a weaker 3rd quarter
as a surprise.
The bears need to push prices below the last low at $1,257 to get anything
going. And even then all they will meet is one strong support after the other.
The path of least resistance remains to the upside for now.
Action to take: Wait until you can buy the VelocityShares 3xLong ETN (UGLD)
below $10.50
Stop Loss: $8.50
Profit Target: $18.25
Timeframe: 8-10 months
Risk ($1.50) / Reward ($7.75) = 1 : 5,1 (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 $1,185
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. 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.
