Is This A Triple Bottom In Gold? Stay Tuned to Find Out

This is an excerpt from the daily StockCharts.com newsletter to premium subscribers, which offers daily a detailed market analysis (recommended service). It shows the ongoing inter-market effect of a rising dollar, which proves to be weighing on precious metals prices so far.

(Gold Silver Worlds) Gold has been performing badly for some time, but especially since August 21st when our Trend Model changed from a BUY to a SELL. The chart is completely negative with price below the 20EMA, which is below the 50EMA, which is below the 200EMA. Recent support at 1240 failed quickly, but more important support at 1180 may soon be in play.

gold price daily 23 September 2014 category technicals

The weekly chart, however, is ever so much more revealing. We can see that the 1180 support has held twice before, so there is a good chance that it will hold upon another retest. I don’t wish to be overly optimistic because the triangle that has formed over the last year is technically a continuation pattern, meaning it is expected to resolve downward. Also note that during the consolidation, price has made progressively lower highs, showing that the bulls are losing strength. Nevertheless, a triple bottom which forms the base for a new, longer-term up leg is a distinct possibility. As for how to exploit that possibility, we would suggest that it would be best to await a clear bounce off the support area.

gold price technical 23 September 2014 category technicals

 

A major cause of gold’s weakness is the strength of the dollar, but the weekly chart of the dollar ETF (UUP) shows that the dollar has been in a long-term trading range and is currently approaching the top of that range. So the recent strength of the dollar may be about to come to an end, with price reversing and heading to the bottom of the range. That would be very positive for gold.

dollar weekly 23 September 2014 category technicals Is This A Triple Bottom In Gold? Stay Tuned to Find Out

Conclusion: We do not intend these observations to imply a recommendation to buy gold, but as chartists we wait and watch for promising setups. In this case we can see something developing that may prove to be relief for long-suffering gold bulls. Those with interest in the yellow metal should watch it closely over the next few weeks.

H/T Gold Silver Worlds

Gold Price Outlook For 2014 And 2015

(Gold Silver Worlds) In a recent presentation, Dundee’s Martin Murenbeeld explained the bullish and bearish forces at work in the gold market with some 50 charts. The slideshow is available below.

Looking back to 2013, it appeared that investors went heavily into equities which resulted in a massive negative correlation between stocks and gold. On the other hand, Chinese net imports from Hong Kong set record volumes.

More importantly, however, Murenbeeld looks into the gold price expectations for 2014 and 2015.

Bearish factors for 2014 and 2015

Basically, in sum, Murenbeeld sees the following bearish factors for gold’s price in the coming 18 months:

  1. The Fed must inevitably tighten policy
    • The Fed is currently “tapering”
    • QE will end late 2014
    • And the Fed will raise rates in 2015
  2. US dollar will remain firm in 2014-15!?
  3. The world economy is sluggish
    • Gold typically weakens during recessions
    • Inflation pressures remain subdued
    • There is often a need for “liquidity”
  4. Equity markets will continue to draw investment interest away from gold
  5. Investors still have gold to sell – and “technicals” bearish

This is only the summary of this view. Readers are recommended to study the accompanying charts which are available in the presentation below.

Bullish factors for 2014 and 2015

As for the bullish forces at play, this is what Murenbeeld expects in the coming 18 months:

  1. ETF “supply” down dramatically in 2014-15
  2. Asian physical demand will continue to expand
  3. Central banks will continue to buy gold
  4. Global debt crisis will require ongoing monetary reflation
  5. Global imbalances will remain unresolved until the dollar declines significantly
  6. The commodity cycle will run many more years
  7. Geopolitical crises will multiply
  8. Gold price not “expensive” by normal measures

Gold price scenarios for 2014 and 2015

On the last slide, Dundee provides price targets, as evidenced in the following table:

gold price scenarios 2014 2015 price

Clearly, the targets are rather defensive but for sure not bearish.

Gold Price Outlook September 2014

H/T http://goldsilverworlds.com/price/gold-price-outlook-for-2014-and-2015/

Gold and Silver vs Debt and Taxes

I’m convinced – we can’t escape debt and taxes. Essentially all currency is created as debt, and our financial system creates more debt and more currency into circulation every day. Taxes are insufficient to pay the massive expenditures that our politicians deem essential, so our national, state and local governments fall deeper into debt every year. I think we can all agree – expect more debt and more taxes.

What About Silver and Gold?

National debt has increased from $3 Billion in 1913, to $398 Billion in 1971 to about $17,700 Billion ($17.7 Trillion). Debt and taxes – much more debt – are in our future. Plan on it.

The population of the US slowly increases (203,984,000 in 1970, about 322,500,000 today). Take the national debt and divide by the population to calculate a per capita national debt. Now divide the annual price of gold (annual price is the average daily price for the year) by per capita national debt and graph it.

GoldDebtRatio1994To2014

The gold to population adjusted national debt ratio has increased, on average, for about the last 25 years. You can see the gold bear market (1981 – 2000) and the bull market (2001 – 2011) and the correction (some will call it a bear market) since 2011.

But the point is:

  1. Increasing national debt is a “sure thing.” It has increased over $7.6 Trillion since 10/1/2008.
  2. Unless the Gold to National Debt ratio breaks down (very unlikely), much higher gold prices are a “sure thing.”
  3. Silver will trade up and down with gold, so plan on much higher silver prices also.

Summary

Population adjusted national debt is increasing – inexorably. The gold to population adjusted national debt ratio will decline only if gold falls more rapidly than the national debt grows.

Will that ratio decline? It would take a further large decline in the price of gold to make the ratio decline. But will gold prices collapse even further?

Look at the following graph of the ratio calculated back to 1971. Does the bubble in the gold to national debt ratio in 1980 look similar to the increase in the ratio into 2011? Clearly not! Gold bubbled up from about $100 to over $800 in about 3.5 years back in 1976 – 1980. The rally from the October 2008 lows in gold to the August 2011 high was impressive but not similar to the 1980 rally. You can see from the graph of the ratio that the 2011 high was barely a “blip” on the graph compared to the spike upward in 1980.

GoldDebtRatio1971to2014

Read rest of article