Although the overall trend is still down and the bears continue to be in control
we can observe a bizarre apathetic Gold-market that is now sitting slightly
below the $1,200 level. Neither bears nor bulls have been able to really make
any decisive move let alone any progress.
The battlefield is clearly defined:
Any move below $1,170 should start a sharp sell off and could even trigger
the long expected final capitulation towards $1,035. The bulls instead will
gain momentum with any daily close above $1,210 and could light up a massive
short squeeze if they can break through the heavy resistance zone around $1,220.
Any price action between $1,175 and $1,205 therefore means just a continuation
of the sideways trap.
But a big move is brewing. My personal preference is still kind of bearish
but this outlook is simply missing its confirmation by Mr .Market. It would
be very easy for the bears now but somehow I feel like the bulls might have
a surprise for us....
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Midas Touch Gold Model Summary
The Model continues to be in strong Sell/Bearish Mode.
On the positive side we have a new buy signal due to the falling Volatility.
Also and even more important the CoT-Report is now looking much better.
This indicator is still missing quite some more commercial short covering to
reach a really extreme constellation but the current one is already positive.
A new sell signal happened last thursday on the GDX Goldminers Daily Chart.
That's the only negative change.
After being neutral during most of April the model is currently in the second
week of a bear signal and is pointing towards the typical sell off in May/June.
At the same time a switch to a buy signal can now happen very fast. It only
takes a move above $1,202 which is less than $15 or 1.1% away.
Gold Daily Chart
After eight weeks of grinding sideways movement there is quite some pressure
in the Gold-market and Gold could explode either way anytime. The Bollinger
Bands are as tight as they have been in last august. So a big move is coming
and likely very close.
I have been emphasizing the bear case but due to the improved CoT-Data and
the shrinking volatility a rally in Gold is getting more and more probable.
My model is still bearish and I don't think that this rally would finish the
overall bear market but it could collect enough enthusiastic passengers around
$1,245 for the final "pain-train" towards $1,035.
As written above $1,210 is the first confirmation level for this scenario.
At the same time the bear scenario is still possible too and should become
reality as soon as Gold moves below $1,175 again.
Traders should avoid the sideways trap! To profit from the coming big move
you could use a buy stop above $1,205/$1,210 to catch any bullish advance and
at the same time place a sell stop at $1,170/$1,175 to ride the wave down.
In between these numbers you are trading only noise. Let's wait and let the
market decide.
As an investors I suggest you wait for another chance to accumulate physical
Gold below $1,150 until you hold 10-20% of your net-worth in physical Gold
and Silver as an insurance .
Long-term personal view
The return of the precious metals secular bull market is moving step by step
closer and should lead to the final parabolic phase (could start in summer
2015 or 2016 and last for 2-5 years or even longer).
Before this can start Gold will need a final sell off down to $1,050-$980.
Long-term price target DowJones/Gold-Ratio remains around 1:1.
Long-term price target Gold/Silver-Ratio remains around 10:1 (for every ounce
of gold there are 9 ounces of silver mined, historically the ratio was at 15:1
during the roman empire).
Long-term price target for Gold remains at US$5,000 to US$8,900 per ounce
within the next 5-8 years.
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.
