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
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the Gold Correction Over?

Commodities / Gold and Silver 2010 Jan 15, 2010 - 03:11 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleThe Technical Trader’s view:



WEEKLY CHART

The underlying bullishness of the market is derived from the massive H&S reversal that suggests a minimum move up as far as 1313.

The first impediment was the Fib cluster at 1221-1232.

But the pull back found support exactly where you might expect – the first Prior High at 1072.60.

Look closer.

DAILY CHART

The market bounced off that support from the Prior High, and when the resulting surge faltered, not well how the Prior High at 1114.50 was support again – ratcheting the market better.

There’s no clear reversal in place yet, but the market appears supported for further bull trending in both the short and the medium-term.

The Macro Trader’s view:
Gold is a market that has enjoyed a clear underlying Bullish trend since early 2004. Along the way there have been several corrections lower, some of them relatively steep, but the market has on each occasion shaken off its malaise and resumed its bull trend.

More recently, Gold has tested the lows after making an all time high in December 2009. And earlier this week, it looked set for a fresh rally, but the market has slipped, what lies behind this price action and should bulls be concerned of something more profound emerging?

The rally in Gold has been driven mainly, but not entirely, by the weakness of the Dollar. So it is no coincidence that Gold began its correction at the same time as the Dollar began its own recent correction after a stronger than expected US Non-Farm Payroll report at the beginning of December 2009.

However, the strength implied by that December payroll report hasn’t uniformly followed through in subsequent data releases. Once again, this has led to questions being asked about the strength of the US recovery which has resulted in the Dollar giving back some of its gains.

But the recent strength of Gold wasn’t just due to the Dollar’s price action. As the New Year began traders became more concerned about the level of government debt in many of the developed economies, but especially in the US.

With the current US administration set on a path of almost never-ending debt accumulation, the credit rating of the US has been subjected to scrutiny as never before.
The build up of debt, especially in the US, worries investors because they fear the US could be building up a problem it might struggle with in subsequent years. They think the financing of that debt could and probably will drive up long term yields, stifle recovery, hinder productivity and unleash inflation.

All of these fears are reasons to go long of Gold. But just as this market looked set to rally further, the gains were given back. Once again weaker US data was to blame, causing a deeper sense of angst about the recovery.

However, even if it is right to begin fretting about the strength of recovery (and we currently do not hold that view) the long-term outlook for Gold remains Bullish. If ,as we expect, the recovery gradually builds, traders will focus squarely on the budget deficit and debt, which will undermine the Dollar and support Gold.

If, on the other hand, the recovery falters or turns out to be much more anaemic than current expectations, then the outlook for the deficit and debt looks even worse as policy makers would be tempted to pump prime with yet another unaffordable fiscal stimulus.

In such a circumstance we believe the US would be in line for a sovereign debt down grade, the Chinese et al would voice their concerns about the Dollar’s long term value even louder and Gold would make new highs.

Timing as ever is the key. For now we think this correction has a little further to play out. But don’t be fooled into thinking this is a bear move: it isn’t.

Philip Allwright
Mark Sturdy

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead 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