For the week commencing September 29th, there are some key economic data and the European Central Bank announcement that could impact markets and precious metals. A key event this week is undoubtedly the ECB rate decision on Thursday October 2nd.
Tag: gold outlook
In a recent presentation, Dundee’s Martin Murenbeeld explained the bullish and bearish forces at work in the gold market with some 50 charts. The slideshow is available in this article. On the last slide, Dundee provides price targets. More importantly, however, Murenbeeld looks into the gold price expectations for 2014 and 2015.
Although today’s Fed announcement didn’t really change anything, the financial markets continued to anticipate higher U.S. rates. The first chart shows the 5-Year Treasury Note Yield climbing close to its yearly high. The 10-Year T-Note yield also bounced. The widening spread between U.S. and foreign yields continues to support the dollar. The second chart shows the Dollar Index hitting a new recovery high. That pushed most commodity prices lower. The orange bars in the second chart shows the Gold Trust falling to a new low.
Why should we expect that gold will rally? The answer, in my opinion, can be found in my gold pricing model that has accurately replicated AVERAGE gold prices after the noise of politics, news, high frequency trading, and day to day “management” have been removed by smoothing.
This is the monthy technical analysis by Louise Yamada, exclusively for premium subscribers. In her August 2014 report, she shows the technical levels to watch for all four precious metals, including copper and aluminium. In gold, here remains a series of lower highs all the way from the peak in price and continues within the past year’s trading. Silver is struggling with support. Palladium, however, remains very strong from a technical point of view, and hence bullish. Alluminum is rallying from a a multi-year bottom.
Could this mark the beginning of the decline of gold from prior highs? I don’t think the decline will start with force, given Janet’s comments this past Friday. The Fed is planning to maintain its schedule until better conditions prevail-this is fairly unpredictable given so many exogenous factors that could throw the recovery off, like further economic losses in Europe or China. However, once this begins, we might expect to see capital flow to where higher returns can be made. Given a pent-up demand for higher returns-hopefully it will not create an asset bubble.
If I had to make a guess I would say that both metals sell off one final time into a lower low by early 2015. Based on historical analogues alone, Gold seems to be following the 1996-99 bear market quite well and could bottom around March 2015. At the same time if Silver falls to a lower low around March 2015, that would be one of the longest and most oversold downtrends (not including the 1980-82 bubble crash).
Contrary to popular belief, rising rates are no threat to gold. This metal soared in the 1970s during the last secular rising-rate environment as stocks and bonds got hit. Gold powered higher again in the 2000s with both short and long rates far higher than today’s levels. And gold surged during the only major modern rate-hike cycle seen a decade ago, when the Fed more than quintupled short rates.
Earlier in the year I spoke with Business Television’s Taylor Theon about this very idea that to invest in gold requires not only discipline but also diversification. As I’ve often stressed, we at U.S. Global Investors recommend that 10 percent of your portfolio should be allocated to gold—5 percent to bullion, 5 percent to mining stocks, and rebalance every year. This should always be the case, whether gold is soaring at a good clip or whether its wings appear to have been clipped.
Basic technical analysis shows that mining stocks have recently reverted to their mean for the first time in about three years, while spot gold is gradually working its way back.
Gold and silver have performed relatively well this year and showed strength toward the end of the second quarter. My feeling is that stronger gold and silver prices that we have seen earlier than anticipated this year is a reflection of global political tensions and maybe just a reminder that we are not out of the woods as far as U.S. economic performance is concerned. We look for gold and silver prices to retain most of their gains in the third quarter.
Once the grip of the fiat “dollar” gives way, and it is slowly losing ground, then the price for gold and silver will find their more natural value. Not until. When might that happen? It could be weeks, it could be months, maybe even another year or two, but whenever it happens, it is more likely to be an overnight “adjustment,” with little or no gradual rise, as many may expect. The price could be $1,300 or $1,800 one day, and the next day it could be $4,500 or $7,500 the ounce. No one knows for certain, but at least you know some of the options. Plan accordingly.
Gold prices will rally much higher in the next 5 years. Jim Sinclair’s initial target of $3,500 seems very likely by 2016 – 2019. If the powers-that-be choose hyperinflation to deal with their massive debts, then much higher prices are “in play.” There are many other options. For example, if you don’t trust or like gold, a bank will pay you 1% interest each and every year if you invest in a Certificate of Deposit.
I think that Gold is in an extended Elliott Wave (V) which has a lot of upside potential. Elliott Wave Principle helps to better understand the nature of the market movement and completed with other tools it can forecast the market progress and define important turning points with a high degree of accuracy.