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Gold update

Gold Update

There is something big brewing in the gold market with the US$ in correction mode, Brexit looming, and the gold price at an inflection point.

Gold is on the cusp of breaking up through it’s previous high at $1307 and confirming the start a new multi-year bull market. But, if it fails to break up in June it could fall back to support at much lower levels between $1150 and $1100 or lower. Although any downside break will be fleeting with a bottom very soon (few months). Either option will lead to much higher gold and silver prices in the years to come. Gold is now poised to reach $10000.00-$15000.00 prices in the next bull market of 6 to 8 years duration.

All this and the equity markets are responding to the US$ correction together with an abundance of Brexit anxiety and the usual basket of international toxic background elements. The US$ could trigger something in the short term, either way, although the jury is still out on a US rate hike soon.

A very interesting phenomena is playing out at the moment in the relationship between the US$ and the gold price.  This is usually an inverse correlation in the short term but at the moment it is direct with both moving somewhat in the same direction. This may be because of additional Brexit anxiety fuelling both upwards.

Consider the US$ index graph:

USDsmall

Still in downtrend, correcting up with resistance at the 200 day moving average (red). The latest uptick to 94.53 is due to more hawkish US Fed commentary and building Brexit anxiety.

The gold price chart is rising in concert with the US$, and is way north of the 200 day moving average.

Goldsmall

The gold risk / reward balance in the extreme short term seems to revolve around exceeding the previous price highpoint at $1306 and whether much of the recent price rise is due to Brexit anxiety. If the price increases above $1307 this will be extremely bullish, and if the British elect to ‘stay in’ and evade Brexit this might be bearish. Hence the gold inflection point is pregnant with potential either way. Any downside risk is however likely to be of short duration.

The gold / silver ratio is trending in the correct direction: Downwards.

Goldsilver ratosmall

The Dow / Gold ratio is trending down as it works through a consolidation phase with the appearance of potentially breaking downwards from a short term flat rising wedge.

DowGoldratiosmall

So, all the elements are in position for what appears to be a period of much greater gold strength as it completes confirmation of the start of a new multi-year bull market which will see much higher prices.

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