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Gold Update

Sep 22nd, 2016 No comments

A timely look at the Gold and Silver markets with the US Fed and BOJ meetings culminating yesterday 21 Sep 2016.

Long Term

The gold price bottomed at $1045 in early Dec 2015 and increased 31% to the high point in early Jul 2016 in the first leg of the new gold bull market. It has since corrected down to now approach completion of the downward move which will provide the foundation for the start of the second upward leg of the bull market: This is now reasonably close to the turning point as it approaches the 200 day moving average and price may or may not move lower still.

The second leg of the bull market will see gold increase significantly to test the all-time high of $1950, and in this new 8 year cycle will increase to astonishing levels above and beyond $5000 and even $10000 an ounce. Chart courtesy of GoldPredict.

lt-goldsmall

Similar to gold, the silver price bottomed at $13.60 in Dec 2015 and increased 53% to the high point at the start of Aug 2016 in the first leg of the new silver bull market. It has since corrected down in a sideways move for the start of the second upward leg of the bull market.

In traditional mode the silver price is exhibiting a more bullish appearance than gold and is set to test the 2011 high of $50. In this new 8 year cycle silver is likely to increase to more astonishing levels as it surpasses $50 in the cup and handle pattern dating all the way back to the $50 peak in 1980. In accordance with this pattern silver is likely to reach a peak equivalent to the depth of the cup at a price of $500. Chart courtesy of GoldPredict.

lt-silversmall

The Case for Gold and Silver

Alan Greenspan told a conference sponsored by Stanford University and the University of Chicago in Washington last week “It is the worst economic and political environment that I’ve ever been remotely related to. On the economic front, the U.S. is headed toward stagflation”. Indeed, most of the world is also headed for stagflation, some already there.

The world grows increasingly frustrated with the incompetence of the establishment with central banks incapable of managing economies back to health. Even the US (probably the healthiest of world economies) produced a slew of negative data for September, and the US Fed again yesterday was prevented from hiking rates. The world status quo remains threatened with unsustainable debt levels, low interest rates, anaemic growth rates, etc., and the impending collapse of the international monetary system looms ever closer with the next global financial crisis greater than the last one in 2008.

This is the environment which will cause precious metal demand to soar, with investors flocking to gold during a widespread crisis in confidence.

Short term Gold analysis

The correction phase consists thus far of a sideways move with a support trendline and short term buy signal at $1310. The gold price has edged higher by the US Fed meeting yesterday, but is still some way above the 200 day moving average at a range of about $1270. This might prove to be a false breakout and price might still well reverse down to this level.

st-goldsmall

Analysis of the gold price correction chart (monthly) over the last 5 years indicates up penetration through the down trendlines as well as the final confirmation of a Gold Cross to mirror the Dead Cross at the start of the downturn. Also, the analysis includes annotating the chart with sequential A, B, C, and D marks at turning points. This illustrates:

  • the first C high point lower than the preceding C (mid-2012) suggesting the start of the correction;
  • the first C high point higher than the preceding C (mid-2016) suggesting confirmation of the uptrend after the correction;

gold-crosssmall

The traditional ratios used to evaluate gold price direction:

  • Dow / Gold price ratio (Decrease indicates higher gold price;
  • Gold / Silver price ratio (Decrease indicates higher gold price;

Consider the Dow / Gold ratio below. This is in steady decline indicating a continued increase in the gold price.

dow-goldsmall

Consider the Gold / Silver ratio below. This is in steady decline indicating silver is now leading gold in the rate of increase which in turn indicates continued increase in the gold price.

gold-silversmall

All the indications are appropriate for the gold price to increase as the price moves well into the next 8 year cycle.

Short term Silver analysis

The correction phase consists thus far of a sideways move with a support trendline and short term buy signal at $18.60. The silver price has edged higher by the US Fed meeting yesterday, but is still some way above the 200 day moving average at a range of about $18. This might prove to be a false breakout and price might still well reverse down to this level.

st-silversmall

Analysis of the silver price correction chart (monthly) over the last 5 years indicates up penetration through the down trendlines as well as the impending Silver Cross to mirror the Dead Cross at the start of the downturn. Also, the analysis includes annotating the chart with sequential A, B, C, and D marks at turning points. This illustrates:

  • the first C high point lower than the preceding C (mid-2012) suggesting the start of the correction;
  • the first C high point higher than the preceding C (mid-2016) suggesting confirmation of the uptrend after the correction;

silver-crosssmall

It would appear that Gold and Silver may well have ended their downwards price correction, although a short period more might be well worth waiting for.

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