Gold made a new five year low last Friday. It is hanging on the last inch
of its support zone between US$1,130 and US$1,140. While my model has correctly
been bearish since mid of June I personally thought that the positive seasonality,
the extreme negative sentiment and the bullish CoT-Data would deliver more
support. Obviously my model has been smarter than myself which was the intention
for its creation...
Now the door is wide open for the long expected final capitulation in Gold.
With the recent extremely bearish price action it should be clear that Gold
will need to see the US$1,035-US$980 before a new bull market can begin. However
if prices reverse from here to the upside a tradable bottom and a seasonable
bounce is very likely.
The Philadelphia Gold and Silver Index XAU has been listed since 1979. It
currently represents 30
different mining companies. Last Friday this index hit a 13 year low after
crashing through longterm support around US$65. The performance of the mining
sector is simply a disaster. While Gold still is up 328% from its 2001 lows
this index is down 1.68% over the same timeframe.
Midas Touch Gold Model Summary
My mechanical model continues to be in Sell/Bear Mode.
Due to the rising volatility the Gold Volatility CBOE Index changed
to a sell signal. The SPDR Gold Trust lost 15.19 tonnes during the last two
weeks and therefore this analysis module switched to a sell signal. The only
positive change comes from the US Real Interest Rate. The monthly year-over-year
percentage change in the U.S. Consumer Price Index turned positive for the
first time in 2015! According to my formula this pushes the US Real Interest
Rate into negative territory! A very bullish intermediate factor for Gold....
Overall the model is in Sell/Bear Mode but the Gold
CoT-Report as well as the Gold Sentiment and Seasonality continue
to support a summer-rally.
Gold Daily Chart
Gold has been sliding down the Bollinger Band since end of June already. Now
it looks like it will crash though the November 2014 support at US$1,130. It's
far below its 50MA (US$1,181) and its 200MA (US$1,200). On top the slow stochastic
indicator is now bearish embedded with both signal-lines being below 20 for
three consecutive days. This typically locks in the downtrend. Any recovery
in the next couple of days should therefore be short-lived and probably a dead
cat bounce. Only a move above US$1,160 will signal that we have a tradable
bottom in place and that the seasonal summer rally is on its way.
Short-term traders should only use a move above US$1,160 as a trigger to go
long. Betting on a continuation of the bear trend unfortunately comes with
a very bad risk/reward ratio as Gold is getting oversold.
Investors had the chance to accumulate physical Gold below US$1,150 last week.
I suggest to lower this limit now down to US$1,100.
Long-term personal beliefs
The return of the precious metals secular bull market is moving step by step
closer and should lead to the final parabolic phase. A new bull market will
probably begin in 2016 and could last for 2-5 years or even longer.
Before this can start Gold will need a final selloff 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 5-10 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.
