Gold Price Prediction – Prices Rise on Weak Chicago PMI report

Gold prices rallied nearly 1% on Friday, following worse than expected personal spending and weak manufacturing figures. Concerns over the US and China’s locking heads are also helping to buoy the yellow metal. The dollar continued to move lower as yields edge slightly lower, which helped buoy the price of gold.

Technical Analysis

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Technical analysis

Gold prices moved higher recapturing resistance which is now support near the 5-day moving average at $1,720,  Target support is still an upward sloping trend line that comes in near $1,698. Below that level is support near the 50-day moving average at $1,684. Short-term momentum has turned positive as the fast stochastic recently generated a crossover buy signal. Medium-term momentum is negative but turning neutral as the MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory that points to consolidation.

The Institute of Supply Management reported that the May Chicago PMI came in at 32.3 versus expectations it would rise to 40.0. This compares to 35.4 in April. That’s the weakest since 1982. Among the main five indicators, order backlogs and supplier deliveries saw the largest declines.

For a look at all of today’s economic events, check out our economic calendar.

Gold Weekly Price Forecast – Gold Markets Form Support of Looking Candle

Gold markets initially fell during the week but found enough support at the $1700 level to turn around and form a bit of a hammer. This has been an interesting couple of weeks for gold, as it simply consolidates in general. I think at this point it is likely that we will continue to see this market show a lot of noise, and therefore it is going to be difficult to simply jump in with a huge position. Having said that, you clearly cannot short gold at this point, there is a lot of the world out there looking to buy gold “on the cheap.”

Gold Price Predictions Video 01.06.20

At this point in time, the $1700 level looks to be crucial, just as the $1760 level is. If we can break above there, then it is likely would go looking towards the $1800 level. Breaking above there then opens up the possibility of a move to $2000, something that I do feel it is only a matter of time before we reach. After all, there is plenty of central bank printing, and it is likely that the gold markets respond due to the fact that fiat currencies are trying to be devalued. If that is going to be the case, then people will run towards precious metals.

Beyond all of that, there are a multitude of negative headlines out there that could cause issues, and that of course drive money into gold for safety. With this in mind, I fully anticipate that gold will continue to be one of the better performers for the rest of the year, therefore I like buying breakouts.

For a look at all of today’s economic events, check out our economic calendar.

Metals Nearing Critical Momentum for New Parabolic Rally

While the US stock market has rallied over the past 5+ weeks, Gold has stalled near $1730 to $1740.  We issued a research post suggesting the GREEN Fibonacci Price Amplitude Arc was acting as major resistance and once that level is breached, we expect a big upside move in Gold.  Currently, Gold has reached just above the Green Price Amplitude Arc and this week may be a critical moment for both Gold and Silver in terms of a momentum base.

GOLD FUTURES WEEKLY CHART

Gold has continued to move high in a series of waves – moving higher, then stalling/basing, then attempting another move higher.  This recent base near $1740, after the deeper price rotation in February/March, confirms our 2018/2019 predictive modeling research suggesting that $1750 would be a key level in the near future.  Part of that research suggested once $1750 is breached, then a bigger upside move would take place targeting levels above $2400 – eventually targeting $3750.

April 25, 2020: Fibonacci Price Amplitude Arcs Predict Big Gold Breakout

This consolidation after the COVID-19 event near $1750 is a very real confirmation for our researchers that the upside breakout move is about to happen.  How soon?  It could begin to break out next week of the following week?  How high could it go?  Our upside target is $2000 to $2100 initially – but Gold could rally to levels near $2400 on this next breakout move.

SILVER FUTURES WEEKLY CHART

While Gold has been consolidating near $1740, Silver has exhibited an incredible upside price move after a very clear Flag/Pennant formation (highlighted in YELLOW on the chart below).  The current upside price rally in Silver appears as though it may breach the MAGENTA downward sloping trend-line and this breakout move may prompt a rally to levels near or above $21 over the next few weeks.

Eric Sprott is very excited about silver and miners. Also, he talks about the demand for physical delivery which is way out of whack and how something could finally give which would be metals go parabolic.

We’ve been suggesting that metals will transition into a moderate parabolic upside price trend as the global markets deal with concerns related to economic activity, debt, solvency, and continued operational issues.  For skilled technical traders, this setup in Metals may be a very good opportunity for skilled technical traders to establish hedging positions in ETFs or physical metals before the breakout really solidifies.

Concluding Thoughts:

Longer-term, we believe metals could continue to rally for quite a while, yet we understand skilled technical traders want to time entries to limit risks.  We believe skilled technical traders should consider hedging their portfolio with a moderate position in Metals/Miners at this time – allowing traders to trade the remaining portion of their portfolio in other sectors/stocks.

If the US/Global markets continue to struggle to move higher over the next 60 to 90+ days, metals/miners should continue to push higher – possibly entering a new parabolic upside price move.  The deep washout low in Silver was an incredible opportunity for skilled traders to jump into Silver miners and Silver ETFs at extremely low price levels.  Now, with Silver at $18.40, it’s time to start thinking about $21+ Silver and $2100+ Gold.

Please take a moment to visit www.TheTechnicalTraders.com/tti to learn more about our passive long term investing signals, Also, get our swing trading signals here www.TheTechnicalTraders.com/ttt.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
Founder of Technical Trader Ltd.

 

Gold Price Forecast – Gold Markets Continue to Grind Higher

Gold markets have rallied a bit during the trading session on Friday as we continue to see a lot of concerns around the world. Furthermore, central banks continue to have the printing presses running at full tilt. Ultimately, this suggests that we should continue to see fiat currencies get devalued. The gold market as the natural place to go looking to protect yourself from falling value of currency, so I think we continue to see that factor into the buying to say the least. Furthermore, you have the concerns about the multitude of potential global headlines that could cause issues, and therefore it makes sense that people are using this as a way to protect themselves.

Gold Price Predictions Video 01.06.20

Looking at the chart, I do see a lot of resistance between the $1750 level and the $1760 level. If you can break above there, then the market is likely to go looking towards the $1800 level. Ultimately, the $1800 level is significant resistance, so if we do break above there then the market is free to go much higher over the longer term. That being said, it looks like we are still in the midst of trying to form some type of ascending triangle, and at this point even if we were to pull back from here, it is only going to end up being a buying opportunity. With all of the various concerns around the world when it comes to global trade and of course the pandemic, it is hard to imagine a scenario where gold does not rise over the longer term. The 50 day EMA underneath continues offer plenty of support as we have seen over the last couple of months.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: Friday, May 29 – Gold at Yesterday’s High

The gold futures contract gained 0.09% on Thursday, as it extended its consolidation following bouncing off $1,700 support level on Wednesday. Gold has been trading within a downward correction after reaching new monthly high of $1,775.80 on Monday almost two weeks ago. Wednesday’s price action was quite bullish, but gold keeps extending over month-long consolidation, as we can see on the daily chart:

Gold is 0.6% higher today, as it gets back to yesterday’s high. Financial markets remain in risk-on mode, as stocks hover along their new medium-term highs. What about the other precious metals?: Silver gained 1.18% on Thursday and today it is 2.6% higher, platinum lost 1.14% and today is trading 0.4% higher. Palladium lost 1.61% yesterday and today it is 1.6% lower again.

The recent economic data releases have been confirming negative coronavirus impact on global economies. Today’s Personal Spending number release came out worse than expected. However, the Personal Income data was better than expected. The market will await today’s Fed Chair Powell speech at 11:00 a.m. We will also have a speech from President Trump today. Investors are now waiting for the Chicago PMI release at 9:45 a.m. There will also be Michigan Sentiment number release at 10:00 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, May 29

  • 5:00 a.m. Eurozone – CPI Flash Estimate y/y, Core CPI Flash Estimate y/y
  • 8:30 a.m. Canada – GDP m/m, RMPI m/m, IPPI m/m
  • 8:30 a.m. U.S. – Personal Spending m/m, Personal Income m/m, Core PCE Price Index m/m, Goods Trade Balance, Preliminary Wholesale Inventories m/m
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
  • 11:00 a.m. U.S. – Fed Chair Powell Speech

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Silver Price Daily Forecast – Silver Gets To New Highs

Silver Video 29.05.20.

Silver Continues Its Upside Move

Silver managed to get above the resistance at $17.50 and gained upside momentum. The move is supported by gold price upside and weaker U.S. dollar.

Gold has managed to settle above $1700 per ounce as the increase in U.S. – China tensions drives demand for safe haven assets.

Gold/silver ratio has firmly settled below 100 and continues to decline. Before the coronavirus crisis, gold/silver ratio was below 90, so a possible return to pre-crisis levels could be very beneficial for silver.

The U.S. dollar continues to lose ground against a broad basket of currencies despite its safe haven status, and the U.S. Dollar Index has already tested the 98 level. Weaker U.S. dollar is bullish for silver as it makes it cheaper for buyers who have other currencies.

In the near term, silver’s price action will heavily depend on the global market reaction to the upcoming news conference of the U.S. President Donald Trump where he is set to unveil new measures against China.

If the markets will be in a bearish mood following the news conference, the precious metal segment may gain additional upside momentum as investors will increase purchases of safe haven assets.

Technical Analysis

silver may 29 2020

Silver managed to get above $17.50 and has good chances to develop significant upside momentum. The recent peak in RSI is yet to be reached, so silver should not have problems with momentum given the right catalysts.

If this upside move continues, the next resistance is located at $18.15. In case silver manages to settle above $18.15, it will gain additional upside momentum and head towards resistance at $19.00.

This level will likely serve as a material obstacle on silver’s way up since it’s the pre-crisis high of 2020. In fact, silver has tried to test the $19.00 level two times this year, and each such attempt failed. The last time silver traded above $19.00 was back in September 2019.

On the support side, silver will continue to get significant support near $17.00. The support at this level was so strong that a move below it may signal a change of a near-term trend for silver.

In case silver gets below $17.00, the next support area is located between pre-crisis levels at $16.50 and the 20 EMA at $16.60.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Trump’s Announcement, China’s Response Sets the Tone

Gold is trading higher on Friday in reaction to lower Treasury yields and a plunge below long-term support by the U.S. Dollar. The catalysts behind gold’s strength are lingering U.S.-China trade tensions as traders cautiously await Washington’s response to the Chinese parliament’s approval of a national security law for Hong Kong.

At 12:26 GMT, August Comex Gold is trading $1745.60, up $17.30 or 1.00%.

The price action suggests that traders are betting against the U.S. Dollar ahead President Trump’s response to China’s tightening control over Hong Kong, which could worsen tensions between the two over the financial hub.

Traders fear that new U.S. sanctions against China might escalate into something more serious. If Trump announces more tariffs, for example, then look for retaliation by China. Both moves will put pressure on the U.S. and Chinese economies at a time when they are just starting to show signs of recovering from the impact of the coronavirus pandemic.

Moh Siong Sim, a currency strategist at Bank of Singapore, doesn’t expect Trump to come down too hard on China because of the state of economy. He said, “You can never quite predict Trump. But I think this year it’s really difficult for him to do tough action.”

Trump to Hold Press Conference

U.S. President Donald Trump is expected to hold a news conference on China later on Friday as his administration moves to pressure Beijing over its treatment of Hong Kong.

“People will be looking for guidance to see whether that could trigger further escalation between the two largest economies. After Trump’s speech, people will also be keen to see China’s response,” said Bank of China International analyst Xiao Fu.

“Even with many economies reopening, the economic status is still quite weak. So with this new geopolitical tension it means that recovery in many parts of the world can take longer, which could lift gold prices.”

Daily Forecast

The direction of the gold market the rest of the session on Friday will be determined by Trump’s announcement. A soft response by Trump to China could help the U.S. Dollar recover, pressuring gold prices.

But a tough response that garners a swift retaliation from China will likely drive the U.S. Dollar lower against the major currencies, which will be supportive for gold.

For a look at all of today’s economic events, check out our economic calendar.

Will the Fed Trigger Inflation This Time, Boosting Gold?

During Great Recession, many people feared that the Fed’s quantitative easing would trigger high inflation, or even hyperinflation. As we know, it didn’t happen. Why? Well, the main reason is that the Fed created money – that’s true – but in the form of bank reserves. And this is a very specific medium of exchange that does not enter the real economy like cash, but stays within the interbank market. You see, bank reserves are a special kind of money used only between commercial banks and central bank and between commercial banks themselves. So, larger supply of reserves does not therefore automatically translate into higher prices.

This can happen only if these additional reserves motivate commercial banks to expand their lending. Investors should remember that in the contemporary banking model based on the fractional reserve banking, the bank deposits account for the majority of the money supply. And when the bank deposits are created? They are created whenever banks grant loans.

As the chart below shows, the growth rate of credit supply was falling during Great Recession, reaching even negative values for some time. Why? For two reasons. First, American households have deleveraged, i.e., they decided to pay back the debts they had, so they were not interested in taking new loans. Second, as the name suggests, the global financial crisis was, well, financial crisis to a large extent. It means that banks were severely hit and they were left with a lot of toxic assets. So, banks themselves were not interested in granting new loans, rather they cleaned their balance sheets. Please also remember that the supervisors tightened the bank capital requirements in the aftermath of the Lehman Brothers’ collapse.

Chart 1: US bank credit (annual % change) from January 2007 to December 2010.

However, this crisis is different. The Fed and other central banks did not only introduce quantitative easing, but they also implemented other programs which can turn out to be more inflationary. For example, the US central bank will lend, under the Term Asset-Backed Securities Loan Facility, to holders of certain AAA-rated securities backed by newly and recently originated consumer and small business loans. Moreover, the new Main Street Lending Program set by the Fed in April works like this: commercial banks grant loans to small and medium companies employing up to 10,000 workers or with revenues of less than $2.5 billion, and then they retain 5 percent of the loan on their balance sheets but sell the remaining 95 percent of the loans to the Main Street facility created by the Fed.

All these programs aim to support the flow of credit to employers, consumers, and businesses, encouraging commercial banks to grant new loans to companies that have suffered as a result of the economic lockdown. Moreover, the financial sector has not been hit initially by the coronavirus crisis, while the supervisors eased reserve and capital requirements for banks. The demand for loans from entrepreneurs is also vivid. All this means that the pace of growth of credit and money supply may be higher than during the Great Recession. Indeed, as the chart below shows, they accelerated in March and April.

Chart 2: The annual % change of the US bank credit (green line) and M2 money supply (red line) from January 2019 to April 2020.

 

Summing up, the unconventional monetary policy implemented in the aftermath of the Great Recession did not spur inflation. However, this time may be different. To be clear, we are not saying that we will see hyperinflation in the US. That’s still very unlikely. What we mean is that the commercial banks are – so far – significantly more eager to grant new loans. So, the resulting increase in money supply should create higher inflation after some time, if other factors remain unchanged.

In other words, this crisis is more likely to result in stagflation than the Great Recession, especially as economy faces disruptions in the supply chains. Indeed, please take a look at inflation expectations derived from the 5-year inflation-adjusted Treasuries displayed in the chart below – as you can see, the market does not expect deflation now, as it did in the aftermath of the previous economic crisis.

Chart 3: US 5-year breakeven inflation rate from January 2007 to April 2020

Given that gold is considered to be an inflation hedge, the higher odds of inflation are fundamentally positive for the gold prices. It does not mean that disinflation or deflation would be negative for the yellow metal, as it could shine nevertheless during the crisis of any kind, but increased chances for stagflation should be an additional factor that could encourage more investors to buy gold.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Brent Oil and Gold With Interesting Setups

In today’s analysis, we will focus on commodities: Gold and Oil. In the previous months, Gold was climbing has been mostly moving higher and oil has been declining. Despite the most recent rise in the price of Brent and a small decline in the price of gold, we think that we are about to see a comeback to the dominant trend. In both cases, gold has a nice bullish signal and oil is drawing rather bearish pattern.

First, lest start with Brent Oil, where its price has doubled since the end of April. In the last two weeks, the upswing stopped and the price is creating a head and shoulders pattern. The price is creating the right shoulder of the pattern. The main up trendline was already broken but the neckline is still intact. In this case, the price breaking the neckline can be a nice selling opportunity.

The second instrument is Gold, where the price is currently breaking the upper line of the flag formation. The flag was a correction in the bullish trend, so it promotes another wave up. The real, legitimate buy signal will be triggered, when the price will break the horizontal resistance at 1735 USD/oz.

The last instrument is not a commodity but the USDJPY pair which is definitely worth mentioning. This Friday is crucial for this pair as the price has managed to escape from the recent sideways trend. Sellers broke two up trendlines and the lower line of the rectangle pattern. Currently, we are testing this last support as a resistance. The test so far is positive for sellers, which may indicate a willingness for a further slide. Sentiment here is negative.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – Test Of Key Resistance At 1.2350

GBP/USD Video 29.05.20.

Increasing U.S. – China Tensions Do Not Help The U.S. Dollar

GBP/USD is testing the resistance level at 1.2350 as the U.S. dollar remains under pressure against a broad basket of currencies despite the increase in U.S. – China tensions.

U.S. President Donald Trump is set to hold a press conference on China on Friday. The key intrigue is whether U.S. will choose some mild sanctions like travel bans for certain Chinese officials or impose new tariffs on China.

Interestingly, the deterioration of U.S. – China relations and the prospect of a new phase of the trade war between the two biggest economies do not help the U.S. dollar which has served as a safe haven asset of last resort during the coronavirus crisis.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has broken out of the 99 – 101 range and is trending down, which is bullish for GBP/USD. Currently, the U.S. Dollar Index has settled closer to 98.

It’s too early to say whether the safe haven status is shifting from the U.S. dollar to gold, which is gaining ground today. If that’s the case, GBP/USD will get more support in the upcoming trading sessions.

Technical Analysis

gbp usd may 29 2020

The recent sell-off, caused by fears about upcoming Brexit problems, proved to be temporary, and GBP/USD quickly returned above 1.2250 and headed towards the test of the nearest resistance level at 1.2350.

This level has already been tested several times, and each time GBP/USD met significant resistance. The 50 EMA is located in the nearby and serves as an additional obstacle on the way up.

In case GBP/USD manages to settle above 1.2350, it will gain additional upside momentum and head towards the next resistance level at 1.2450.

On the support side, the nearest support for GBP/USD is located at the 20 EMA at 1.2280, followed by the major support level at 1.2250. Most likely, the whole area between 1.2250 and 1.2280 will serve as one significant support level for GPB/USD.

If GBP/USD settles below this level, it will gain downside momentum and head towards the test of the next support area between 1.2170 and 1.2200.

For a look at all of today’s economic events, check out our economic calendar.

 

Gold Price Prediction – Prices Edge Higher Following Weak US Data

Gold prices moved higher on Thursday following a slew of US economic data which came in worse than expected. GDP shrank by 5%, durable goods orders fell by 17% and jobless claims continued to rise climbing by 2.1-million. Despite a robust jobless claims headline number, this was the lowest total since the coronavirus crisis began. The dollar moved lower but failed to generate tailwinds for gold prices as US yields edged higher. Riskier assets continued to rally which capped any upward momentum in gold prices.

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Technical analysis

Gold prices moved higher but was unable to push through resistance near the 5-day moving average at $1,719,  Target support is still an upward sloping trend line that comes in near $1,693. Below that level is support near the 50-day moving average at $1,675. Short-term momentum has turned negative as the fast stochastic recently generated a crossover sell signal in overbought territory. Medium-term momentum has also turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram has also generated a crossover sell signal. The histogram is printing in the red with a declining trajectory which points to lower prices.

US GDP Contracted More than Expected

GDP which is the broadest measure of economic health, fell at an annual rate of 5% in the Q1 a bigger decline than the 4.8% drop first estimated a month ago. It was the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Futures (GC) Technical Analysis – Potentially Bearish Secondary Lower Top May Be Forming

Gold climbed more than 1% early in the session but has since then given back all of those gains. I guess there wasn’t enough gold bug money out there willing to chase it higher at current price levels. Surprising because the chat room commentators think gold should be trading at $2000 because of all that stimulus money floating around.

The price action suggests the stimulus money is fully-priced in so unless the central banks and governments decide to throw more money into their respective economies, a gold rally is going to have trouble gaining traction. It also suggests that perhaps traders are getting fed up chasing the headlines and may be waiting for a strong pullback into a value area.

Just keep remembering that gold is an investment and not a so-called safe-haven asset. Gold investors want to buy gold low and sell it higher. Professionals are buying dollars when there is fear and they are selling gold and dollars when conditions soften.

That’s the way the market is trading now. The traditional dollar/gold relationship has been shelved for the time being.

If gold prices went up because of the threat of a major global recession then it makes sense that it should weaken a little now that the economies are opening up. But we could get another flare-up in prices if a second wave of coronavirus cases hits.

At 18:04 GMT, August Comex gold is trading $1726.70, down $0.10 or -0.01%.

In other news, the number of Americans filing for unemployment benefits held above 2 million for a 10th straight week, while a separate report showed GDP contracted at a bigger-than-expected 5% annualized rate in the first quarter, the deepest drop in output since the 2007-09 Great Recession.

Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on May 18.

A trade through $1787.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend changes to down on a move through $1683.30, but the really hard selling is likely to start if $1668.40 fails as support.

The minor trend is down. This is controlling the momentum. Taking out $1701.60 should strengthen the downside momentum and bring the new minor top down to $1743.70.

The minor range is $1787.50 to $1701.60. Its retracement zone at $1744.10 to $1754.30 is resistance.

The short-term range is $1789.00 to $1668.40. Its 50% level at $1728.70 is potential support and also the trigger point for an even steeper sell-off.

The main range is $1454.80 to $1789.00. Its retracement zone at $1621.90 to $1582.40 is the primary downside target and potentially major support.

Short-Term Outlook

We’re going to be watching trader reaction and order flow at $1728.70 into the close. This should tell us if the selling is getting stronger or if buyers are coming in to support the market. The reaction to the earlier rally suggests the move was fueled by short-covering rather than new buying.

Furthermore, the formation of a secondary lower top at $1743.70 will be a sign of weakness.

Gold Price Forecast – Gold Markets Continue to Grind Higher

Gold markets continue to see a lot of volatility, as we approach the $1750 level yet again. After forming a major hammer for the trading session on Wednesday, it makes sense that we bounced a bit from there. The 50 day EMA has also offered support, so therefore it makes sense that buyers would have been attracted to that level as well. Furthermore, it is formed right about the $1700 level. That being said, if we were to turn around a break down below the hammer, then it would be extremely negative. At this point in time, it is likely that the market will offer quite a bit of support underneath there though, so I find that to be very unlikely to happen. If it does, then I would look to “reset” to the upside.

Gold Price Predictions Video 29.05.20

The $1600 level will be massive support again, if we do get down there due to the fact that the 200 day EMA. Ultimately, this is a market that continues to see a lot of buyers on dips and quite frankly it should, due to the fact that the central banks around the world continue to print currency as fast as possible, and of course there are a lot of economic concerns out there when it comes to the global economy, trade, US/China relations, and a whole host of other things. With all of this, it makes sense that gold should be one of the better performing assets.

For a look at all of today’s economic events, check out our economic calendar.

Daily Gold News: Thursday, May 28 – Gold Higher Again

The gold futures contract gained 1.24% on Wednesday, as the market retraced most of its Tuesday’s decline. It bounced off a $1,700 support level again. Gold has been trading within a downward correction after reaching new monthly high of $1,775.80 on Monday a week ago. But yesterday’s price action was quite bullish and today it goes higher. But gold extends an over month-long consolidation, as we can see on the daily chart:

Gold is 0.7% higher today, as it is extending a short-term uptrend. Financial markets remain in risk-on mode, as stocks reach new medium-term highs. What about the other precious metals?: Silver gained 0.92% on Wednesday and today it is 0.4% higher, platinum gained 0.55% and today is trading 0.5% lower. Palladium lost 0.54% yesterday and today it is 0.6% lower again.

The recent economic data releases have been confirming negative coronavirus impact on global economies. Today’s U.S. GDP number release came out at -5.0% and Durable Goods Orders fell by 17.2%. The Unemployment Claims remained steady at over 2 million. We will also await the Pending Home Sales number release at 10:00 a.m.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days. Tomorrow we will get another series of the U.S. economic data releases and a speech from the Fed Chair Powell at 11:00 a.m.:

Thursday, May 28

  • 8:30 a.m. U.S. – Preliminary GDP q/q, Unemployment Claims , Durable Goods Orders m/m, Core Durable Goods Orders m/m, Preliminary GDP Price Index q/q
  • 10:00 a.m. U.S. – Pending Home Sales m/m
  • 11:00 a.m. U.S. – FOMC Member Williams Speech

Friday, May 29

  • 5:00 a.m. Eurozone – CPI Flash Estimate y/y, Core CPI Flash Estimate y/y
  • 8:30 a.m. Canada – GDP m/m, RMPI m/m, IPPI m/m
  • 8:30 a.m. U.S. – Personal Spending m/m, Personal Income m/m, Core PCE Price Index m/m, Goods Trade Balance, Preliminary Wholesale Inventories m/m
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
  • 11:00 a.m. U.S. – Fed Chair Powell Speech

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Silver Price Daily Forecast – Silver Gets Back Above Support At $17.00

Silver Video 28.05.20.

Silver Looks Ready To Test The Nearest Resistance

Yesterday, silver tried to settle below $17.00 but this attempt was unsuccessful, and silver returned back above this support level.

Gold managed to recover after the sell-off and is trading above the key $1700 level. Gold price upside is very important for the whole precious metal segment as it attracts new investments into the sector.

The U.S. Dollar Index is trying to settle below the support level at 99 following the release of various economic reports. In general, the economic picture remains grim, but the better-than-expected U.S. Continuing Jobless Claims report provides hopes that active hiring has already started in some sectors of the economy.

Gold/silver ratio is trying to get below 100 and looks set to continue the recent downside trend. Before the coronavirus crisis, gold/silver ratio was below 90, and a return to such levels will lead to material silver price upside.

So far, silver has shown that it has material support at current levels. The gold price upside and the general market upside help silver as it depends both on industrial demand and investment demand.

Technical Analysis

silver may 28 2020

Silver has significant support just below $17.00. It has already made four attempts to settle below this level, but each attempt was unsuccessful, and silver quickly returned back above $17.00.

RSI has left the overbought territory, suggesting that upside momentum can increase further. If this happens, silver will soon test the nearest resistance level at $17.50.

In case silver manages to get above the resistance at $17.50, it will gain additional upside momentum and head towards the next resistance level at $18.15. In this scenario, silver will break out of consolidation, so the upside move may be quick.

On the support side, the nearest support level for silver is located near $17.00. If silver manages to settle below this level, it will likely gain significant downside momentum and quickly head towards the test of the next support at $16.50.

This is the support at pre-crisis levels. In addition, the 20 EMA has finally increased to $16.50, so I’d expect a lot of interest close to this support level.

For a look at all of today’s economic events, check out our economic calendar.

 

Price of Gold Fundamental Daily Forecast – Traders Chasing Hong Kong Headlines

Gold prices are moving higher on Thursday after a seven-day setback as tensions between the United States and China over a proposed Hong Kong security law escalated, while fresh monetary and fiscal stimulus measures from India, Japan and the Euro Zone to mitigate the coronavirus fallout also lent support.

At 12:31 GMT, August Comex gold is trading $1737.90, up $11.10 or +0.64%.

Unlike earlier in the week, gold buyers aren’t shying away from the long-side despite higher equity prices. As far as I know, there is still optimism in the air over the reopening of global economies and progress being made toward a vaccine to stop coronavirus. These are the two factors traders blamed for gold’s decline this week.

Did something change? Even the reaction to fresh stimulus measures from Europe and Japan is a bit of a surprise since these ideas have been out there for over the week. Furthermore, we can’t be sure yet if we’re looking at short-covering or new buying. After all, recent data showed many professionals trimming long gold positions in recent weeks and some actually shorting the precious metal.

The point I’m trying to make is that gold is expected to trade at heightened volatility levels over the short-term, but there is enough stimulus out there to provide a cushion for long-term investors.

We continue to have a longer-term upside bias, but we do realize that over the short-run, due to the ever-changing headlines, gold is going to have experience unexpected price swings.

If you’re a gold trader then you’re going to like the volatility. If you’re an investor than you’ll have to ride out the price swings, however, with a two-sided trade, there’s a better chance of a pullback into a major value zone.

The Headlines

Gold traders appear to be reacting to two narratives today:  Hong Kong and fresh stimulus.

As far as Hong Kong is concerned, most of the headlines appear to be coming from the United States. China has been merely responding to U.S. comments although we’re not sure if they have been official comments.

U.S. Secretary of State Mike Pompeo said Hong Kong no longer qualifies for its special status under the U.S. law, dealing a blow to its status as a financial hub. Additionally, U.S. President Donald Trump has a long list of possible responses to China’s to impose a national security law on Hong Kong, including visa and economic sanctions, said David Stilwell, assistant Secretary of State for East Asia.

China has basically said it may respond with sanctions of its own when provoked to do so.

As far as fresh stimulus is concerned, the European Union unveiled a 750 billion Euro ($826.13 billion) plan on Wednesday. Japan approved a fresh $1.1 trillion stimulus package also and India may need to pump about $20 billion into its struggling economy.

In U.S. economic news, Preliminary GDP fell 5.0% versus 4.8%. Core Durable Goods plunged 7.4%, better than the -14.8% forecast. Durable Goods Orders fell 17.2%, also better than the -19% estimate.

Weekly Unemployment Claims were a dismal 2.213 million. This was worse than the 2.100 million forecast. The previous week was also revised lower to 2.446 million.

For a look at all of today’s economic events, check out our economic calendar.

All Eyes on the HUI Breakout Invalidation!

The key technical development of this week in the precious metals market is HUI’s invalidation of the breakout above the 2016 highs. It will be particularly interesting to see where it closes the week, as an invalidation in weekly closing terms will be a crystal-clear bearish confirmation.

Gold miners reversed before the end of yesterday’s session, but they didn’t manage to take HUI back above the highest weekly close of 2016 – the 278.61 level. The HUI closed at 271.06.

On the daily chart, we see that a short-term breakdown is currently being confirmed.

The GDX ETF moved below the rising support line based on the previous April and May lows and it closed there for two consecutive trading days. If the GDX closes below the rising dashed line once again today, the breakdown will be confirmed.

And based on gold’s 4-hour gold chart, it could be the case that the very short-term upswing that started yesterday, is already over.

Gold approached its short-term declining resistance line, and it’s currently testing it. This line already held less than a week ago, so it favors lower prices at this time.

Of course, by the time you read this analysis, gold might already be after a breakout. In this case, we wouldn’t be surprised to see gold futures at about $1,740 or even $1,760 before the next decline takes place. Again, that is IF the breakout takes place, but the entire point of creating resistance lines for gold is to detect gold’s tops – places that are likely NOT to be broken. Or that are going to be broken, but then an invalidation will follow, leading to further declines.

The GLD ETF bounced from the rising support line yesterday, and it then moved to the above-mentioned resistance line – that’s a relatively normal course of action. Based on HUI’s invalidation of the breakout above the 2016 high, it seems that the top is already in for gold and gold stocks, and the price action yesterday and today in gold doesn’t invalidate it.

And what can one forecast for silver?

The white metal is still showing strength on a very short-term basis, which further confirms the toppy nature of the most recent price moves. Silver tends to outperform at the very end of a given upswing, so we could even see more of that phenomenon – especially if the stock market moves even higher from here.

Silver is known (at least it should be known) for its fakeouts. Silver often breaks above certain resistance levels, only to invalidate these breakouts shortly thereafter. If silver’s “breakout” is not accompanied by an analogous move in gold or miners, the odds are that it’s a fakeout. The odds increase further if this action was preceded by a rally.

Therefore, if silver moves higher from here, and even breaks to new May highs, it might not be a bullish development at all. It could be a fakeout that only takes the white metal to about $18.50 or so – the declining resistance line based on the previous highs – and then starts the next huge downleg. Please keep in mind that silver already launched one huge slide from almost $19 this year, so another big move lower from these levels could definitely take place.

All in all, it seems that we’re going to see one more sizable move lower in the precious metals market before they move much higher, and the odds are that the downswing has already begun or it’s going to start shortly.

Thank you for reading today’s free analysis. Please note that it’s just a small fraction of today’s full Gold & Silver Trading Alert. The latter includes multiple details, but most importantly, it includes the clear discussion of what will be the sign telling one that gold’s move lower is almost certainly completely over. That’s the detail, we think you might enjoy, want, and need right now.

If you’d like to read those premium details, we have good news. As soon as you sign up for our free gold newsletter, you’ll get 7 access of no-obligation trial of our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits: Analysis. Care. Profits.

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Is the Worst Behind Us and Gold Has to Plunge Now?

A lot happened over the last few days. Let’s start with the analysis of fresh economic data. First, the initial jobless claims came in at 2.4 million in the week from May 9 to May 16, as the chart below shows. While the number of Americans who applied for the unemployment benefit have declined for seven straight weeks following the peak of 6.9 million in late March, it is still a mammoth figure, much higher than before the pandemic (when about 200,000 people used to apply for the unemployment benefit each week).

It means that the devastation in the US labor market has been unprecedented. As the chart below shows, almost 39 million of people claimed benefits since the beginning of the epidemic, which implies that the unemployment rate is comparable now to the rate seen during the Great Depression, or even higher! Importantly, the trend of total claims since March 21, 2020, is still rising strongly, which means that the recovery is so far weak, despite the partial reopening of the economy.

Second, the Chicago Fed’s national activity index, which measures whether the economy expands above or below the average growth, declined from a negative 4.97 in March to a negative 16.74 in April. The number is the worst in the data series history which begins in 1967, easily surpassing the disaster of the Great Recession, as the chart below shows.

However, situation has improved somewhat in May, at least according to regional manufacturing surveys. For example, the Philadelphia Fed Manufacturing Index rose from -56.6 in April to -43.1 this month. The reading is still terrible, but less so than one month ago. Similarly, the New York Empire State Index rebounded from -78.2 in April to -48.5 in May.

The latest PMI data from the IHS Markit also show some improvement. The flash manufacturing purchasing managers index rose from 36.1 in April to 39.8 in May, while the flash services purchasing managers index increased from 26.7 to 36.9. It means that the worst is probably behind us.

Implications for Gold

What does the recent bunch of data imply for the US economy and the gold market? Well, it seems that the rate of economic collapse has peaked in April. This is probably why the stock market rallied this week, with S&P 500 reaching the psychologically important level of 3,000. People become more optimistic with the number of infections of the coronavirus under control and relaxed containment measures. And a further planned easing will help the economy further, but demand could remain weak with some restrictions and social distancing remaining in place. In other words, the US economy should rebound later this year, but is not out of the woods yet – so the pace of recovery may be slower than the most optimistic investors hope for.

In other words, the stock market may be priced for an economic recovery that the data so far does not support. The initial crash was an overreaction, so now investors look for sparkles of hope everywhere. For sure, there are many reasons for being optimistic, but the war with coronavirus is not over. So, there might be some correction in price as investors could go into risky assets, but gold still seem to be a rational addition to the portfolio. Given that second-order effects (think about the consequences of high debt, geopolitical repercussions, or the possibility of corporate bankruptcies, etc.) have not been probably fully priced in yet, and that it’s very difficult to predict them, the significant portion of the safe-haven demand for gold should remain in place.

If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Gold-Silver Ratio And Correlation

From Investopedia:

Correlation is a statistic that measures the degree to which two variables move in relation to each other. Correlation measures association, but doesn’t show if x causes y or vice versa, or if the association is caused by a third–perhaps unseen–factor.”

For example, there is a possible correlation between localized, bad weather and crop failures. But how do you predict the timing and extent, or the effects, to a degree that can be profitable?

And there certainly is a correlation between the price of labor and materials vs. the finished cost of building a new home. But there is no correlation between the price of labor and materials vs. the number of new housing starts.

We can find patterns and rhythm that might appear to be correlation (or inverse correlation) by plotting the price differential of any two items but it still does not imply correlation.

So, are gold and silver correlated?

ARE GOLD AND SILVER CORRELATED?

Being literally specific according to the above (“correlation measures association…”) then, the question becomes “Is there association between gold and silver?”

The answer is yes, strictly speaking. But, only as it pertains to their use as money.

The association is blurred by the fact that silver’s primary role is industrial, and its role as money is secondary to its use in industry; whereas gold’s primary role is in its use as money, and its industrial use is secondary.

“The basic value of either gold or silver stems from its primary fundamental. This means that gold is valued for its role as real money and silver’s primary value stems from its use in industry. And the primary fundamental for each metal will always be the same, even though there can be changes in the relative relationship of primary and secondary uses.” (See Gold And Silver – Fundamentals Be Damned)

Below is a chart of gold prices for the past one hundred years. The prices are adjusted for the effects of inflation…

http://www.macrotrends.net/

As a result, we can see that gold’s value has increased considerably over the past one hundred years. Nearly all of that increase has come in the past fifty years.

Gold’s increase in price and value are inversely correlated to the decline in value of the US dollar over the same time frame.

This makes perfect sense because gold is real money and the original measure of value for all goods and services; whereas, the US dollar is a substitute for gold (i.e., real money).

There is an established association between gold and the US dollar. Gold’s higher price over time reflects the ongoing loss in value (purchasing power) of the US dollar. The more the US dollar loses value, the higher the price of gold will go.

Now let’s look at a similar chart for silver prices, also adjusted for inflation…

http://www.macrotrends.net/

Here we can see that silver has declined in value over the past one hundred years and is cheaper now than it was a century ago.

The inflation-adjusted price of silver and its real value has stayed below its price point of one hundred years ago for eighty-four out of the past one hundred years.

The two times which silver prices moved generally in tandem with gold came when gold was responding – and catching up – to ongoing and accumulated losses in purchasing power of the US dollar.

After briefly exhibiting extreme volatility on the upside, silver prices quickly dropped back to their historically evident trading range below $20 per ounce, inflation-adjusted.

Any association/correlation between silver and gold is limited in nature because each metal has a fundamental role which is considerably different from the other. Gold price history is indicative of its association and inverse correlation with the US dollar. Silver prices reflect the white metal’s primary use as an industrial commodity.

GOLD-SILVER RATIO FAVORS GOLD

Let’s look at one more chart. This one is the ratio of gold prices to silver prices, the gold-to-silver ratio…

In this chart we see more evidence of what we saw in both charts above. In both price and value terms, gold continues to increase relative to silver.

Referring to the same point of focus as in both charts above, the gold-to-silver ratio is nearly three times higher than it was one hundred years ago. It has continued to move higher, favoring gold, over the past fifty years.

As we said before, we can calculate a ratio of prices for any two different items; but, those ratios will not imply correlation UNLESS there is measurable association.

As far as gold and silver are concerned, any association is strictly limited. It is not that the ratio cannot move lower, in favor of silver. It can. And, it probably will at some point. But it will likely be very short-lived.

The ratio cannot and does not tell us when such a situation might occur. Ironically, after looking at these charts again, it might be more reasonable to entertain a prediction that IF  the ratio dropped to a significant degree in favor of silver, one might load up on gold and sell silver, with the expectation of quick resumption of the currently established clear trend of an ever higher ratio, favoring gold.

For a look at all of today’s economic events, check out our economic calendar.

(also see Gold-Silver Ratio: Debunking The Myth)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

 Gold – Patience Is A Virtue

Anybody who missed this rally might now be under stress since governments and central bankers are doing everything to destroy the purchasing power of this hard- earned currency which is sitting in the bank account paying no interest. Gold has done a good job to protect its holders. However, blindly chasing any asset that is in an uptrend is not a good strategy. The key is always to wait for pullbacks and dips so that one can buy low instead of high. Gold – Patience is A Virtue.

Review

Looking back, my last two Gold analyses on March 15th and April 19th were partly a little too pessimistic. Although there was indeed a brutal sell-off down to US$1,450 on March 20th, the unprecedented expansion of the money supply by almost all central banks worldwide then quickly caused gold prices to rally towards US$1,747 within the following four weeks. Since this high point on April 14th, gold prices over all have traded sideways between US$1,660 and US$1,765. Thus, there wasn’t any deep pullback!

However, gold prices haven’t run away either. On the contrary, it must be noted that despite the corona crash and liquidity flooding, gold basically has not made much progress since its first interim high at US$1,689 on 24th of February. Currently, with spot gold trading slightly below US$1,710 prices are up less than US$20 since end of February!

In Euro terms, the results do look somewhat better. Here prices have just recently reached a new seven-year high at EUR1,632 in the past trading week and have also been in a flat up-trend over the last few weeks.

All in all, the price of gold has thus been stagnant for nearly eight weeks.

Technical Analysis: Gold in US-Dollars

Gold in US-Dollar, weekly chart as of May 26th, 2020. Source: Tradingview
Gold in US-Dollar, weekly chart as of May 26th, 2020. Source: Tradingview

On the weekly chart, gold bulls continue to strive to finally leave the uptrend channel that began in August 2018 behind them. So far, they have not yet succeeded in doing so. Should the bulls now run out of steam or do need a breather, a quick pullback towards the mid of the trend channel would be very likely. However, despite weeks of consolidation at a high levels, there is still no sign of exhaustion. But one could speak of a “dwindling bullish momentum”.

It is noticeable that since the beginning of the year gold has been moving primarily in the zone between the 61.8% fibonacci retracements (US$1,586) and the 78.6% fibonacci retracements (US$1,733). These fibonacci retracements relate to the major correction in the gold market when prices fell from US$1,920 down to US$1,045 between 2011 and 2015. Since the final low in December 2015, the bulls have now recovered 61.8% and 78.6% of the lost distance.

Hence, the zone between US$1,586 and US$1,733 is the last place of refuge for the gold bears. If this last bastion can be sustainably conquered, the way to the all-time high at US$1,920 and prices above US$2,000 would be clear. From this perspective alone, the confusing back and forth over the last few weeks is therefore not surprising. At the same time the bears obviously do not (yet) have enough strength to wrest larger space from the bulls here.

However, the stochastic oscillator does not look good on the weekly chart. Both lines are still bullishly embedded above 80, but as soon as the momentum starts to turn, the strongly overbought position immediately will kick in and deliver a sell-signal. in that case a multi-weeks to multi-months corrective phase becomes extremely likely.

All in all, gold prices have been treading water for weeks now and seem to be slightly stuck above US$1,700. However, a trend reversal has not happened. Ideally, the slightly disjointed picture will dissolve with a healthy but overall manageable pullback in the summer months.

Gold in US-Dollar, daily chart as of May 26th, 2020. Source: Tradingview, Patience Is A Virtue
Gold in US-Dollar, daily chart as of May 26th, 2020. Source: Tradingview, Patience Is A Virtue

On the daily chart, the bulls managed to break out of the five-week consolidation triangle on May 14. With the following spike towards US$1,765 they immediately made it clear who is in charge. In the meantime, however, this actually bullish breakout has already come to an end without any sustained gains, as prices have been falling rather rapidly from US$1,765 down to US$1,698.

Now bulls will have to answer with a bounce and a compelling recovery. However, prices above US$1,730/1,735 might already cause difficulties. Nevertheless, the chances of another wave up into the range between US$1,745 and US$1,765 are pretty good. Especially as the stochastic oscillator he has cooled down considerably on the daily chart and move in the neutral zone. This setup would once again provide enough room for another bullish run.

Furthermore, the silver price, which had just begun to move two weeks ago, does not appear to have reached the end of its rally yet. Rather, silver could pull the price of gold up again for the next few weeks.

In summary, the daily chart is neutral after weeks of consolidation. Similar to last spring and last autumn, gold prices managed to work off the heavily overbought situation without major losses but only with mild declines. Thus, at least in the short term, there is once again the chance of a rise towards the highs of US$1,765 on the chart. Even a new high at US$1,800 can not be ruled out.

A commitment of Traders: Gold

Commitment of Traders for Gold as of May 19th, 2020. Source:CoT Price Charts
Commitment of Traders for Gold as of May 19th, 2020. Source:CoT Price Charts

Since the breakout above the multi-year resistance zone at US$1,350/1,375 in May 2019, the situation in the gold futures market has been extremely overstretched and completely unhealthy. With the temporary crash in mid-March, the pent-up pressure was at least partially released, with commercial hedgers covering part of their exorbitantly large short position.

At the same time, however, the supply and demand shock caused by the corona crisis caused even greater difficulties for the paper jugglers on the COMEX. Short-term pullbacks of US$50 can apparently still be arranged somehow, but much lower prices below US$1,500 are not in sight. However, the commercial hedgers would need these prices to profitably cover their cumulative short position of currently 290,174 contracts.

Commitment of Traders for Gold as of May 23rd, 2020. Source: Sentimentrader, Patience Is A Virtue
Commitment of Traders for Gold as of May 23rd, 2020. Source: Sentimentrader, Patience Is A Virtue

Overall the CoT-report continues to provide a clear sell-signal for the gold price. A promising contrarian bottleneck is far away and would be present at the earliest with the cumulative short position reaching levels below 100,000 contracts.

The development in the silver futures market is positive, however. Here the professional players have used the crash down to US$11.60 to cover their short position. From the CoT perspective silver should no longer be threatened by another major pullback.

Sentiment: Gold – Patience Is A Virtue

Sentiment Optix for Gold as of May 23rd, 2020. Source: Sentimentrader
Sentiment Optix for Gold as of May 23rd, 2020. Source: Sentimentrader

The Optix sentiment barometer for the gold price continues to provide significantly high levels of optimism among market participants. Although the pullback over the last few days has certainly caused a decrease in euphoria, the overall consensus is still clearly in favour of further rising gold prices.

Rarely, however, do markets simply move straight up. Rather, they have to use twists and turns to make sure that the masses do not fully participate in the price increases. In order to refresh the so-called “wall of worry”, a pullback towards US$1,650 or 1,600 would probably suffice.

In summary, the Gold Optix continues to urge caution. Only when mistrust and possibly even panic and fear spread at least to some extent among gold investors, will there be meaningful and contrarian entry opportunity again. Other than that, patience is a virtue.

Seasonality: Gold – Patience Is A Virtue

Seasonality for Gold as of May 23rd, 2020. Source: Seasonax
Seasonality for Gold as of May 23rd, 2020. Source: Seasonax

For the next five to ten weeks the seasonal pattern is not supporting rising gold prices. Typically, June is the month of pullbacks in the gold market, which usually bottom out in July or mid August at the latest. Should a similar pattern occur this year, a good buying opportunity would present itself. By the way, these summer lows often also marked the low for the year.

Seasonality for Gold in US-Election Years as of May 27th, 2020. Source: Seasonax

This year however, the U.S. presidential elections, which are scheduled for November 3rd, must also be taken into account. This event should determine the second half of the year for financial markets in general. The American central bank FED will certainly do everything possible to prevent the markets from collapsing before these elections.

The further expansion of the money supply necessary for this should certainly support precious metal prices on the one hand. On the other hand, however, there is also a statistical pattern which indicates potential difficulties for gold in the second half of the year. In front of the last U.S. presidential election in 2016, gold had gotten stuck around US$1,350 to 1,375 in the summer months and then corrected down to US$1,123 by mid-December.

In conclusion, the seasonal outlook currently recommends a patient and wait-and-see stance. Should there be a pullback within the next two months, it would be a good buying opportunity. If, on the other hand, prices remain stable around and above US$1,700 in June and July, the danger increases that the unfavorable U.S. election cycle will start to affect gold from late summer.

Bitcoin/Gold-Ratio

Sound Money Bitcoin/Gold-Ratio as of May 23rd, 2020. Source:Chaia

Currently, you have to pay 5.15 ounces of gold for one Bitcoin. In other words, a troy ounce of gold currently costs only 0.194 Bitcoin. Since the low point of the corona crash, Bitcoin has been able to outperform gold by a considerable margin.

On top, since the second week of May, Bitcoin has been knocking at the upper edge of the large consolidation triangle once again. Thus, the chances of a breakout to the upside continue to rise. Only if there would be another blatant attack of weakness in Bitcoin we would have to prepare for another round of consolidation lasting several months. Otherwise, and that is what it looks like at the moment, the breakout from the triangle is imminent in these weeks until the summer. Subsequently, a sharp rise in Bitcoin prices would be the logical consequence.

Generally, buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in the two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals (preferably physically), while in cryptos and especially in Bitcoin one should hold at least 1% up to 5%. Paul Tudor Jones holds a little less than 2% of his assets in Bitcoin. If you are very familiar with cryptocurrencies and Bitcoin, you can certainly allocate higher percentages to Bitcoin and maybe other Alt-coins on an individual basis. For the average investor, who is normally also invested in equities and real estate, 5% in the highly speculative and highly volatile bitcoin is already a lot!

“Opposites compliment. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of Gold and the digital aspect of Bitcoin you have a complimentary unit of a true safe haven in the 21st century. You want to own both!” – Florian Grummes

Conclusion and Recommendation: Gold – Patience Is A Virtue

Gold doesn’t seem to know where it’s going these days. For weeks now, prices have been clearly trading above US$1,700 and trying to break through the resistance zone between US$1,740 and 1,765 only to fall all the way back to and slightly below US$1,700. At the same time, volatility has been on retreat since March 19th. At least things have calmed down a bit in the gold market. But the bulls still have the upper hand. The bears, on the other hand, have been making increased efforts to reverse the trend since the last high point at US$1,765. Apart from a decline to just under US$1,700, however, they have not (yet) achieved much.

Generally, we should always remember that just before the biggest rises in the gold market, all weak hands are usually shaken off. In this respect, a pullback in early summer remains the preferred scenario. This way, gold prices do not have to fall so extremely low. A decline to US$1,650 or to the rising 200-day line in the US$1,600 range would presumably be completely sufficient. Afterwards, gold would be ready for the next wave up, which should then target the resistance around US$1,800 as well as the all-time high at USD$1,920.

If, on the other hand, gold prices can hold steady above US$1,700 throughout the coming two to three months, the probability increases that there will be a more pronounced correction starting in late summer just a few months before the U.S. elections.

Either way, the risk/reward-ratio for gold is not ideal at the moment. It is therefore advisable to simply remain patient and wait at least until an oversold setup on the daily chart and ideally also on the weekly chart. However, one should not lose sight of gold, because in times of unconditional stimuli from almost all central banks worldwide, every somewhat larger pullback already means a buying opportunity in the gold market.

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