1. Market Update
During the last two weeks gold has been quite volatile moving between $1,191
and $1,252 without being able to establish a clear trend. So far the consolidation
below the recent top at $1,263 has a bullish taste but gold needs to break
out above $1,250 very soon otherwise we might be right in front of a multi-week
correction. Failing at $1,248 - $1,252 increases the odds for the bears dramatically.
At the same time the stock markets are recovering as expected. I would not
be surprised to see a large bear market rally until summer.
Finally Bitcoin is acting bullish and continues to move within its triangle
pattern. With my recommendation to buy Bitcoins below $380 you should be up
at least 14.7% already. Don't chase it here. We should get one more chance
to buy a dip before the breakout above $500 will happen.
Interview with Commodity-TV on February 22nd:
2. Bitcoin within a multi-month bullish triangle consolidation
Since my last analysis the price for one Bitcoin is up 9,5%. It looks like
the suspected triangle formation is playing out. This means Bitcoin should
advance towards $480 - $500 where another pullback is very likely. Overall
the price should not fall below $380 anymore otherwise the uptrend line would
be broken.
Action to take: Hold your Bitcoins and let your winnings run. Don't buy here.
Stop Loss: Increase your stop to $330
Profit Target: $800
Timeframe 6 -18 months
Risk($80) / Reward($430) = 1 : 5.4 (very good ratio!!) Position Sizing: Don't
risk more than 1% of your equity.
3. The Midas Touch Gold Model on a Buy Signal since Feb. 24th
The model went to neutral mode on February 16th but quickly flipped back to
a Bull signal. Compared to last week we have the following changes:
Gold Volatility CBOE Index
Gold in Indian Rupee
Gold in Chinese Yuan
US-Dollar Daily Chart
New sell signals are coming from:
Gold CoT-Report US-Dollar Daily Chart
The negative seasonal outlook as well as the high commercial net short position
are delivering sell signals while the market technically speaking is still
in a very bullish mode. The trend is your friend until it breaks. Moving above
$1,255 will flip the "Gold in USD Daily Chart" to a buy signal. Overall a clear
bullish signal.
4. Gold so far within bullish consolidation
Gold is acting very bullish. Any pullback is being bought and despite a stronger
US-Dollar gold is holding up very well. It seems like the ETF demand is putting
the physical market under pressure. The ETF liquidation which had a huge impact
on the gold market during the last four years is being reversed now. Everybody
wants to have some insurance in his portfolio. The GLD Gold Trust holdings
have increased by over 51 tones in just the last two weeks.
The professional hedgers and the paper speculators have not been able to keep
the prices down while the commercial short position has risen to its highest
level since last october making the market more and more susceptible. Yet the
price action is not delivering any bearish signal so far but many traders obviously
doubting gold's recent strength and keep on shorting the market. The surprise
still favors the upside. The next price target would be $1,310 which would
mean a breakout above the three year downtrend channel.
At the same time all this bullish action during the last two weeks has been
happening clearly below the recent top at $1,262. The longer the bulls are
not able to push gold sustainably above $1,240 - $1,250 the more vulnerable
the market will become. A decision is imminent and likely to happen this week.
I have expressed my bearish concerns in the last two weeks but it seems like
I have been a bit early. Rather the market has been going sideways. Right now
I prefer a neutral standpoint and will let the market tell me which way to
go. Although it's tempting to short gold there is no setup that justifies such
a counter trend trade at the moment. Action to take: Nothing. Stay at the sidelines
but plan to buy with both hands once Gold is pulling back towards its 200MA
($1,131). Investors should continue to buy with both hands if Gold moves below
$1,140 again until you have at least 10% of your net-worth in physical Gold
and Silver.
5. Portfolio & Watch list
Portfolio: We bought Bitcoin at $372. New stop at $330. Profit target
$800. Plan to hold for a couple of months.
Buy Gold at $1.140 with a stop at $1.100. Mostly likely we will have to wait
until march for this trade to become possible.
Buy GDX (Market Vectors Gold Miners ETF) at and below $15.45 with a stop at
$14.00
Buy GDXJ (Market Vector Junior Gold Miners ETF) at and below $21.15 with a
stop at $19.00
Watch list: DRD Gold (DRD)
Endeavour Silver Corp. (EDR.TO)
McEwen Mining (MUX.TO)
MAG Silver Corp. (MAG.TO)
United States Oil Fund (USO)
Agriculture ETF (DBA)
iPath Bloomberg Grains Total Return Fund (JJG)
Track-Record: We got stopped out of our gold short position on January
4th at $1,083 for an outstanding gain of $97/contract or 8.2% (=8.08R).
6. Long-term personal beliefs (my bias)
Officially Gold is still in a bear market but the big picture has massively
improved and the lows are very likely in. If Gold can take out $1,307 we finally
have a new series of higher highs. If this bear is over a new bull-market should
push Gold towards $1,500 within 1-3 years.
My long-term price target for the DowJones/Gold-Ratio remains around 1:1.
and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold
remains around US$5,000 to US$8,900 per ounce within the next 5-8 years (depending
on how much money will be printed..).
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.
Bitcoin could become the "new money" for the digital 21st century. It is free
market money but surely politicians and central bankers will thrive to regulate
it soon.
