Gold did indeed bounce during the last two weeks and managed to post an impressive
recovery. My model did a great job and helped me to create some nice profits
in my short-term Gold trading. Unfortunately Thursday's candlestick is not
really encouraging but momentum now is short-term bullish while the longer
trend remains bearish. Until early summer the coming months typically will
do everything to confuse you. Last year for example Gold moved sideways for
many weeks only to shake out everybody with a final sell off before exploding
$110 higher in just a few days. Overall there are no signs that the bear market
is finally over. But the current recovery seems to have more time and space
to go. Yet my model clearly identifies it as a bear market rally. If Gold manages
to move above $1,265 and especially $1,300 the picture would brighten up dramatically.
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Midas Touch Gold Summary
During the last two weeks the model changed to a strong buy signal. The first
buy signal that flashed was the GDX Daily-Chart followed by the Gold/Silver-Ratio.
A very interesting development was the falling US Real Interest Rate.
It went from 0.69% down to 0.49% within just 2 weeks. During the same timeframe
Gold did exactly what it should do during falling real interest rates - it
jumped $77.90 higher. Due to the fast recovery Sentiment is now neutral,
while surprisingly the Gold CoT-Report is still very positive for Gold.
Only the CoT-Data for Silver (which is not part of the model) has deteriorated
significantly.
All in all the model is on a short-term buy signal and supports the view of
an ongoing recovery towards $1,240.
Gold Daily Chart
After seven weeks of falling prices Gold finally found a bottom at $1,141.
During the last two weeks bulls took over and pushed Gold back towards the
50-MA and the upper Bollinger Band. This massive resistance zone was too strong
of course and led to an unhealthy looking candlestick on the daily chart. As
the Stochastic indicator is getting overbought too we might see some form of
a setback during the next couple of days. Momentum remains to the upside but
Gold needs to make a higher low to create a new short-term up trend. While
the longer term trend still is clearly down the positive CoT-Data suggests
that the recovery has further to go at least.
As my model gave a buy signal the logic strategy for traders is to look out
for a long-entry somewhere between $1,181 and $1,171. A tight stop can be placed
at $1,157. Should Gold manage to recover towards $1,240/$1,250 I'd consider
a short with a stop above $1,267 if the CoT-Data gives a sell signal.
The most promising strategy although remains to simply wait until May/June
for the typical pre-summer bottom in Gold and the Gold stocks.
Investors had the chance to accumulate physical Gold below $1,150 and should
wait for now. If Gold moves below $1,150 again continue to accumulate into
weakness until you hold 10-20% of your net-worth in physical Gold and Silver
as an insurance.
Long-term personal view
The return of the precious metals secular bull market is moving step by step
closer and should lead to the final parabolic phase (could start in summer
2015 or 2016 and last for 2-5 years or even longer).
Before this can start Gold will need a final sell off down to $1,050-$980.
Long-term price target DowJones/Gold-Ratio remains around 1:1.
Long-term price target Gold/Silver-Ratio remains around 10:1 (for every ounce
of gold there are 9 ounces of silver mined, historically the ratio was at 15:1
during the roman empire).
Long-term price target for Gold remains at US$5,000 to US$8,900 per ounce
within the next 5-8 years.
Fundamentally, as soon as the current bear market is over Gold should start
the final 3rd phase of this long-term secular bull market. 1st stage saw the
miners closing their hedge books, the 2nd stage continuously presented us news
about institutions and central banks buying or repatriating gold. The coming
3rd and finally parabolic stage will end in the distribution to small inexperienced
new traders & investors who will be subject to blind greed and frenzied
panic.
