Home > Currency, Gold > Weekend Market Analysis 12 Mar 2017

Weekend Market Analysis 12 Mar 2017

Mar 12th, 2017

Precious metals and miners should probably reach interim daily lows soon, and performance through the rest of Mar should define behaviour through the next 3 months. Much may depend on definition of the gold 8 year cycle lows, and whether Dec 2015 stands or whether prices fall away to yet lower lows.

Key indicators this week are the US$, US Gold Miner Index (XAU), and the gold 8 year cycle low which need to be evaluated.

US$

The US$ continues forming its threatening ‘head & shoulders’ pattern and closed the week down in spite of the ‘good’ US jobs report on Friday clearing the way for the US rate hike next week. The index closed the week with another ‘Evening Star’ pattern, as it did last week. This behaviour is counter to the more ‘hawkish’ US Fed and its planned rate hikes this year.

The US$ is poised to either break up to about $108 (in accordance with the triple top breakout and ‘hawkish’ US Fed stance) which will be bad for gold, or to break down (in accordance with certain Elliott Wave predictions and Donald Trump’s need for a weaker Dollar) which will be good for gold. US$ behaviour this week is in accord with the latter of these 2 options.

Gold Price

The gold price has broken down through resistance and its reversal is gaining momentum. The next key support level is at $1179.70 and any close below would magnify the importance of previous lows at Dec 2016 and thereafter Dec 2015.

The gold price has dropped below the short term support trendline and support at $1220. The next key support is at $1179.70 and any close below that will bleed away to lower prices.

It is now critical to evaluate US miners in the XAU chart as well as the situation with respect to the gold 8 year cycle lows. Despite the good US jobs report clearing the way for a rate hike next week gold rose slightly in the last hours of the week.

 

Silver price

Price has reversed down below resistance and is gaining momentum towards the next key support level at $16.60.

 

If price drops through this key support at $16.60 then this is likely to lead to much lower prices, magnifying the importance of previous lows at Dec 2016 and thereafter Dec 2015.

US Gold Miner Index (XAU)

The US Gold Miner Index ($XAU) closed the week with a relatively strong Friday, having just closed the outstanding gap from Dec 2016. This provides a very early sign of an interim reversal. Much is still to be achieved and the index needs to exceed resistance at 91 if the 20 Dec 2016 low is to be retained.

Gold 8 Year cycle low

The gold 8 year cycle low theory has stood the test of time since Aug 1971 when Richard Nixon de-linked the US$ from Gold convertibility and allowed gold to rise and fall freely. In that process the gold price has risen from about $35 to about $1200 in a rising curve that has dropped to a low point every 8 years within 6 months of US presidential elections.

Those cycles have reached low points within as short a cycle of 30 quarters and as long a cycle as 34. Converting the quarters into months we get an average of about 97 months, from as short a cycle as 90 months to as long a cycle as 104.

The cycle low in 2008 was very early and the cycle low this time appeared to be even earlier, at about 12 months too soon in Dec 2015. This was considered justifiable because of the atrocious condition the central banks of the world have driven economies and the international monetary system itself, in astronomic debt levels, low to negative interest rates, money printing, and the like. The degree to which the gold price has currently dropped has caused doubt as to whether in fact Dec 2015 was the 8 year cycle low and whether the 8 year cycle low itself still even exists.

Perhaps the early low in 2008 will now cause a very late low in 2017. Or perhaps world conditions will cause the very early low in Dec 2015 to in fact be the low, and that the gold price will not even break down below the Dec 2016 low. If the gold price does break down below Dec 2015 and set a cycle low (estimated probably at 200-Dema at just below $1000), and the historical time frames are adhered to, then the 34th quarter is April – June 2017, and the 104th month (97 + 7) is June 2017.

We need to watch prices very carefully during Mar to either confirm or deny Dec 2015 or Jun 2017.

Conclusion

Precious metals and miners should probably reach interim daily lows soon, and performance through the rest of Mar should define behaviour through the next 3 months. Much may depend on definition of the gold 8 year cycle lows, and whether Dec 2015 stands or whether prices fall away to yet lower lows.

The US$ continues forming its threatening ‘head & shoulders’ pattern although it is poised to break up or down. The US rate hike next week seems to have little effect on the market and has evidently been priced in long since.

Gold and silver prices have broken down through resistance and any close below the next key support levels would magnify the importance of previous lows at Dec 2016 and thereafter Dec 2015.

The recent divergent top requires close attention to miners, and the US Gold Miner Index ($XAU) closed the week with a relatively strong Friday, having just closed the outstanding gap from Dec 2016. This provides a very early sign of an interim reversal but much is still to be achieved.

The gold 8 year cycle low theory has stood the test of time since Aug 1971 and if the current cycle low is to still occur below Dec 2015 price then, if at all, this is likely to happen before the end of the 34th quarter before 30 Jun 2017 (estimated probably at 200-Dema at just below $1000).

General equities and oil remain overpriced.

Categories: Currency, Gold Tags:
Comments are closed.