Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24
Orwell 2024 - AI Equals Loss of Agency - 17th Aug 24
Gold Prices: The calm before a record run - 17th Aug 24
Gold Mining Stocks Fundamentals - 17th Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Breakdown Forecast Downtrend to $1000

Commodities / Gold and Silver 2015 Jun 09, 2015 - 01:46 PM GMT

By: Clive_Maund

Commodities

Although the longer-term bullish case for gold could scarcely be stronger, over the short to medium-term the picture continues weak, with it looking vulnerable to breaking down into another downleg to the $1000 area and perhaps lower. In the last update you may recall that there was some optimism expressed that it might perk up on the dollar topping out, but such has not proved to be the case - instead it has performed miserably and now looks set to drop more steeply to new lows.


On its 8-year chart we can see that gold remains in the grip of the bearmarket in force from its bullmarket highs of 2011. The breakdown from the top area during the earlier part of 2013 lead to a severe decline, which has been followed by a downsloping trading range that has been going on for 2 years now. Its recent poor performance suggests that it is going to break down from this range and gravitate towards the strong support in the $1000 area and perhaps lower towards the lower boundary of the major downtrend channel, which move should end the bearmarket. Such a move would result in it completing a satisfying 3-wave A-B-C correction to the entire bullmarket to date, although it understood that it will not be satisfying to existing gold bulls. In expectation of such a move we are short the sector. It will take an upside breakout from both of the downtrends shown on this chart, preferably on good volume, to abort this scenario.

Gold 8-Year Daily Chart

Apart from showing the latter part of gold's 2-year downsloping trading range, the 6-month chart is not of much use, although it does reveal that gold is coming under pressure from its bearishly aligned moving averages, and could drop quite sharply from here, as it is not at all oversold on its MACD indicator.

Gold 6-Month Daily Chart

Gold's latest COT is in middling ground, and if anything somewhat bearish. In itself it provides us with little guidance one way or the other. Silver's latest COT on the other hand is decidedly bearish, and we take our cue from that.

Gold COT

The Gold Hedgers chart, a form of COT chart over a longer timeframe, is likewise neutral...

Gold Hedgers Position
Chart courtesy of www.sentimentrader.com

The following two charts are a warning not to get too negative, and suggest that gold's expected downleg may not take it lower than the $1000 area. They also warn us to be on the lookout for signs of a reversal at any time going forward. The 1st is the Gold Optix or optimism chart, which shows optimism towards gold is at a low level, and although this is precondition for an important reversal, in itself it won't prevent further losses over the short to medium-term...

Gold Optix
Chart courtesy of www.sentimentrader.com

The other chart showing excessive bearishness is that for Rydex Precious Metals Assets. Again, this doesn't mean there won't be further losses, but it does suggest that that a bottom and reversal is not too far out.

Rydex Precious metals Assets
Chart courtesy of www.sentimentrader.com

Turning to the all-important dollar we see on its 5-year chart that it has broken down from its earlier powerful parabolic uptrend and is now floundering around and presumed to be marking out an intermediate top area. Whilst it remains above its rising 200-day moving average, however, there is the possibility that it could make new highs, which might be occasioned by the euro plunging as a result of Greece effectively adopting another medium of exchange, which is a risk at this point. This is a potential reason for gold and silver dropping to new lows. One possibility is that a Head-and-Shoulders top forms in the dollar, with the Left Shoulder now completed and the Head yet to form.

US Dollar 5-Year Chart

The 6-month chart for the dollar index shows how it bounced from oversold as expected after approaching its rising 200-day moving average. It now looks set to form a trading range between the support and resistance shown, with some chance that it will rise above the resistance to mark out the Head of a Head-and-Shoulders top as mentioned above. A break below the support would lead to a more severe decline, although it looks to be too early for such a move to occur.

US Dollar 6-Month Chart

Conclusion: gold looks set to break down from its 2-year downsloping trading range soon into a downleg that takes it to the strong support level in the $1000 area, with some risk of its dropping further to the lower boundary of its downtrend channel shown on its 8-year chart. To abort this scenario it needs to break out upside from both the channels shown on the chart preferably on good volume, which would be a buy signal. The expected downleg should complete gold's "bearmarket within a larger order bullmarket", and thereafter it is expected to reverse into an uptrend that promises to dwarf that of the late 70's.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2015 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in