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Arguments for lower prices:
- Overall Gold still is in a downtrend. US$1,525.00 remains the line in the
sand. Gold will need much more time to break through this heavy resistance.
Only a move above US$1,430.00 will indicate that the mid- and longer-term
trend indeed has changed.
- Gold Monthly Chart: MACD sell signal active since november 2011
(this is extremely powerful and needs to change before one can really call
the bottom). Due to Gold's recent strong performance it looks like MACD could
create a buy signal within the next 2-4 months.
- Gold Weekly Chart: The strong sell off in march created a bearish
engulfing candlestick pattern which should lead to more selling pressure
once the current bounce is done.
- Gold Daily Chart: So far Gold did not manage to stay above the 38.2%
retracement at US$1,321.21. The whole bounce from US$1,277.40 looks kind
of undetermined.
- Gold/Silver Ratio: The ratio (66.05) continues to move higher. Silver
is lagging.
- Gold Miners (GDX): On Thursday and Friday gold mining stocks sold
off heavily. GDX failed to regain its 50-MA. GDXJ looks weaker as the recovery
in recent days has been pretty flat.
- Sentiment: Latest Kitco weekly Gold Survey showed 64.64% bulls.
Not yet an extreme. Sentiment Score from sentimenttrader.com is
at 50 and remains neutral from longer term perspective.
- "Risk Off" in the stock market continues and could easily spread into other
asset classes. So far Gold has been moving inverse to the stock market. If
stocks start to bounce Gold will suffer.
Arguments for higher prices:
- After an impressive rally from end of december until mid of march, followed
by a sharp correction down to US$1,277.40, Gold found good support at the
january highs and has started a recovery during the last 9 trading days.
The uptrend remains in place.
- Gold Weekly Chart: Gold is now trading within the old downtrend
channel. Although still a downtrend channel, this already is a big improvement.
The MACD buy signal continues and RSI has lots of room to climb higher again.
- Gold Daily Chart: Gold is above it's rising 50-MA (US$1,314.27)
while the 200-MA (US$1,297.73) is running sideways. The "Golden Cross" of
these two averages is very positive and should generally push Gold prices
higher in the next 6-10 months.
- Gold CoT-Data: Commercial net-short position now at 101,743 contracts.
This is more or less a neutral position. Short-term it still might be a bit
high but in the long-term context we have seen commercial net-short position
already close to 290.000 contracts so there is lots of room for rising Gold
prices.
- Seasonality: April & may tend to be a good months for precious
metals. But the best buying opportunity normally shows up at the summer lows
somewhere in june/july.
- US-Dollar: The US-Dollar lost 1.22% during last week and looks weak.
Commercials are slightly positive on the US-Dollar but until end of april
the seasonal window supports lower prices. A weak U.S. Dollar generally supports
Gold.
- Geopolitical tensions seemed to have eased but the Crimea conflict is far
from being solved. This crisis has the potential for the 3rd world-war. Let's
hope that the political leaders will calm down and find a diplomatic solution.
Unfortunately this is not very likely.
- India's month-long elections are under way with 814 million voters casting
ballots to elect the next government. The results will be out on May the
16th. The opposition Bharatiya Janata Party (BJP), which is tipped to form
the next government, has promised to review Gold import duties within three
months of assuming power.
Conclusion:
- In my last analysis I clearly explained that Gold had just finished its
up-leg and that one had to expect some form of a deeper correction. In the
meantime Gold has lost nearly US$115.00 in just 12 trading days. Personally
I was surprised that there was basically no resistance by the bulls at all.
Gold just kept falling without any short-term recovery or oversold bounce.
Neither the 200-MA nor the 50-MA did offer support.
- The recovery that started 9 trading days ago managed to get over US$1,321.21
which is the 38.2% retracement of the sharp correction. Therefore I think
Gold should have enough power to continue climbing higher towards around
US$1,345.00 until end of april/early may. From there I expect the bears will
take over again. This would fit well with the seasonal cycle.
- If Gold does not hold US$1,314.00.00 on Monday and Tuesday, the 200-MA
(US$1,297.73) will be tested again during next week and the bounce maybe
already over.
- Generally I am looking for an important low somewhere between mid june
and early july. Gold could bottom out around US$1,260.00 to US$1,275.00.
But it could also find support at the 200-MA already. It will be an extraordinary
entry chance for swing traders.
- Any daily close below US$1,260.00 probably means another test of US$1,200.00
- US$1,180.00 and (as this would be already the third test) the chances for
a break below this important support would increase significantly. Of course
it could also lead to a very bullish "Triple
Bottom Reversal Pattern" but all this is just too much presumption at
the current time. Simply put: Gold below US$1,260.00 and all bullish bets
are off the table!
- Investors with a long-term perspective should continue to accumulate physical
silver. I think it's a great bargain right now. As well I think Gold is undervalued
at the current prices and should be accumulated physically. But concentrate
your orders on the yearly cycle low somewhere in june...
Long term:
- Nothing has changed
- Precious Metals bull market continues and is moving step by step closer
to the final parabolic phase (could start in summer 2014 & last for 2-3
years or maybe later)
- Price target DowJones/Gold Ratio ca. 1:1
- Price target Gold/Silver Ratio ca. 10:1
- Fundamentally, Gold should soon start the final 3rd phase of this long
term bull market. 1st stage saw the miners closing their hedge books 2nd
stage continuously presented us news about institutions and central banks
buying or repatriating gold. The evolving 3rd and finally parabolic stage
will end in the distribution to small inexperienced new investors who will
be subject to blind greed and frenzied panic.
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