Gold as 2017 approaches
Background
The election of Donald Trump as the new American president created a market paradigm shift and interest rates have bottomed. It is as if tectonic plates in the markets are shifting, and we need to understand how all this will affect the gold price.
This article combines an analysis of chart patterns and gold cycles which collectively now strongly indicate that the gold rally from the Dec 2015 low was a bear market rally and not the start of a new bull market.
Prices will continue to drop further before true bottom is reached which will then provide the buying opportunity of a lifetime.
Comparison between now and Dec 2015
The gold price behaviour comparison between Dec 2015 and Dec 2016 has not produced any possible upward bias but instead potential downwards bias, with the trading pattern now indicating weakness.
US$ Strength
The US$ is rampant in accordance with Trump euphoria and the US rate hike, and the chart of the US$ Index indicates further strength to potentially as high as 115. The inverse correlation with the gold price of course indicates further gold weakness.
Gold price 8 year cycle lows
There is now a strong indication that the gold price rally from Dec 2015 was only a bear market rally and the price is now moving down to its 8 year cycle low, exactly on cue 8 years after the Obama election in Dec 2008.
In moving down to true bottom in gold’s 8 year cycle low the price is likely to drop further to potentially somewhere between $1000 and $890.
This bear cycle has support and resistance trend lines which support the low at $1000.
However, when we observe a more macro view on the monthly chart the indication suggests a lower low at just below $900. In applying a Fibonacci retracement to the previous bull market run from 1999 to 2011 when gold achieved a 600% gain, there appears to be a confluence area between the Fibonacci retracement of 61.8% and the 200 month moving average: The 61.8% Fibonacci retracement is usually a powerful trigger.
It is interesting to note that the false bottom at Dec 2015 reversed off the 50% Fibonacci which is also a powerful trigger.
Conclusion
Gold is likely to drop further before reaching true bottom at the correct 8 year cycle low approximately within the next 3 months. This is likely to occur at a price somewhere around $950, give or take $50. Also, as usual, silver will drop further and faster than gold. Gold miners will react to this in even more pronounced further and faster declines.
The jury is still out on actual improvements Trump might achieve in unravelling the deeds of the Obama administration, and the US$ at 115 will wreak havoc with US trade. The euphoria will pass into history and, as must happen, gold (and the full precious metals complex) will again soon provide the investment opportunity of a lifetime.
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