1. Market Update
During the last two weeks Gold first continued to slide down towards the big
psychological number of $1,000. It seemed to be just a question of a couple
more down days before Gold finally would reach this long term target. Yet on
December the 3rd Gold became very oversold while the CoT-Data already signaled
that the commercial traders had reduced their short positions to record low
levels. At the same time the Euro blasted massively higher due to short covering.
In the following two days Gold had to catch up and last Friday Gold posted
a massive short squeeze too. So far this is only a technical reaction and an
oversold bounce. There is zero confirmation that we have already seen the final
low in the Gold-market Instead it looks like we are in for another round of
tricky recovery and misleading price action.
The positive news are that the miners and silver continue to hold up better.
Bitcoin is sitting just below the $400 level. After the parabolic high at
$420 on November 4th, prices quickly reacted back towards $302, followed by
a multi week sideways consolidation between roughly $320 and $340.
Since early December Bitcoin is on the move again currently attacking the
$400 level. If the support zone around $375 can hold there is a high probability
that we are going to see a breakout above $420 in the coming 1-2 months. If
you still doubt the new up trend take the time to watch this video Het Bitcoin-evang.
The point & figure chart for Gold is now on a buy signal. It will switch
to sell signal if Gold closes below $1,050.
The GDX continues to hold up better than GLD. At the final bottom you want
to see the miners ETF positively diverging from the physical Gold.
2. The Midas Touch Gold Model
Compared to last week we have the following changes: Lots of new buy signals
from the Gold USD-Daily Chart, Ratio Gold/Oil, Ratio Gold/Commodities, Gold
in Indian Rupee, Gold in Chinese Yuan, GDX Goldmines-Daily Chart, US-Dollar-Daily
Chart and US Real Interest Rate.
But Gold Seasonality is on a sell signal until last week of December. The
SPDR Gold Trust continues to see significant outflows.
Overall the model is now in Buy/Bull Mode signaling that Gold might be able
to start a recovery in the weeks ahead.
3. Gold Daily Chart
Gold can do two things from here:
Either we're getting another recovery/bear-market rally or Gold will resume
the downtrend rather soon.
The first case is supported by extreme pessimistic sentiment and the very
bullish CoT numbers. As well my model is pointing towards this direction. A
first target would be the resistance around $1,105. But everything below this
number is just short-term noise and does not really improve the bearish picture.
With a daily close above $1,105 the bulls should be able to use the positive
seasonality starting end of December for a larger rally towards $1,140 and
the 200-MA currently at $1,151.
On the other hand the bears need a daily close below $1,064 to regain control.
We're not far away from this number. The remaining downside risk is approximately
$50.00-$70.00 and I continue to expect the finally low between $980 and $1,035.
Overall we are facing limited downside risk but the bear market could extend
in time yet we are getting very close to a huge opportunity in the gold market
on the long side!! Remain patient but alert and do your homework to be ready
once we are hitting $1,025.
4. Recommendations:
Swing-traders who followed my recommendation to sell Gold short between $1,175
- $ 1,180 should now move their stops to $1,085. You might be able to ride
this winning trade down to $1,025 where you should cover everything.
As well I recommend to place a multiple scale in "Gold long" order between
$1,035 and $980. E.g. 1/4 @ $1,035, 1/4 @ $1,020, 1/4 @ $1,005 and 1/4 @ $985.
Investors finally got a chance to buy physical Gold below $1,050 last week.
Continue to buy with both hands if Gold moves below $1,050 again until you
have 10% of your net worth in physical Gold and Silver.
5. Long-term personal beliefs (my bias)
Gold is in a bear market and headed towards $1,035 - $980. Once this bear
is over a new bull-market should start and push Gold towards $1,500 within
2-3 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.
