The Midas Touch Gold Analysis & Strategy Newsletter
Gold & Silver Update 25th of November 2015
Posted Nov 26, 2015
1. Market Update
After a nasty and brutal sell-off starting mid of October Gold has been consolidating between $1,064 and $1,095 over the last two weeks. Although we are very close to the potential bottom zone around $980 - $1,035 Gold could still continue to consolidate or even start a recovery. The extreme pessimism and the constructive CoT-Data do support a bounce but it looks like nobody wants to catch a falling knife here.
So the long expected final move could indeed happen any time and within just a couple of days. Price-wise I don't see much more downside risk (max 8.5%) but time-wise we could still be in for another round of recovery before the bears finally manage to push prices down towards $1,000.
While commodity prices are still in a massive downtrend, the US-Dollar continues to push higher. At the same time the yield curve is flattening and negative real interest rates are more and more obvious. Yet the Baltic Dry Index (as a representative for global trade) is sitting at 12 year lows while the weak oil price is killing the fracking business. The astronomic world wide debt levels will never be paid back and central banks will continue to flood the markets with liquidity just to keep this craziness going. This will only lead to even more distortion and will diminish accurate price signals. Deflation remains the name of the game and what we are witnessing is very likely the final stage of a decades long fiat money experiment. I believe we have to stay away from any risk in these markets and prefer to be in cash even though it might mean to lose purchasing power. My favorite asset classes remain in Gold and Bitcoin.
Gold because it represents a 5000-year old track record and freedom from 3rd party risk. Bitcoin because it is traded in a free market and represents the technology of the 21st century. Besides that real estate with a positive cashflow and agriculture are two more asset classes I do like. Stocks in general are probably overvalued and many of them are already in a bear market.
Gold needs a daily close above $1,100 to reverse the downtrend on the point & figure chart.
The GDX continues to hold up better than GLD.
At the final bottom you want to see the miners ETF positively diverging from the physical Gold ETF.
2. The Midas Touch Gold Model
Compared to last week we have the following changes:
New buy signals on the Gold USD-Daily Chart, Gold Volatility CBOE Index, Gold CoT-Report, Gold Sentiment, Gold in Indian Rupee, GDX Goldmines-Daily Chart and US Real Interest Rate.
New sell signals are coming from SPDR Gold Trust which continues to lose its holdings and from the US-Dollar-Daily Chart. Gold Seasonality remains supportive until second week of December.
Overall the model is in Neutral/Sideways-Mode since 5 trading days.
3. Gold Daily Chart
Gold continues to behave pretty weak. Although $1,064 so far has stopped the sell-off there is no indication of a major low or even an intermediate bottom. The only bounce towards $1,095 was quick, very short-lived and failed already below $1,105. Only a daily close above $1,105 will open up the chance for a recovery towards $1,130 and maybe higher.
As long as the slow stochastic remains bearishly embedded the downtrend will continue. Once $1,064 is taken out Gold should quickly drop towards my ultimate target zone between $980 - $1,035. Here I do expect at least a huge recovery but more likely the end of the bear market.
Overall we are getting very close to a huge opportunity in the gold market on the long side!! Remain patient but alert and do your homework to be ready once we are hitting $1,025.
Swing-traders hopefully followed my recommendation to sell Gold short between $1,175 - $ 1,180 and should now move their stops to $1,095. You might be able to ride this winning trade down to $1,025 where you should cover everything.
As well I recommend to place a multiple scale in "Gold long" order between $1,035 and $980. E.g. 1/4 @ $1,035, 1/4 @ $1,020, 1/4 @ $1,005 and 1/4 @ $985.
Investors should now be very alert as we are approaching another great buying opportunity below $1,050. If Gold goes below this number buy with both hands until you have 10% of your networth in physical Gold and Silver.
5. Long-term personal believes (my bias)
Gold is in a bear market and headed towards $1,035 - $980. Once this bear is over a new bull-market should start and push Gold towards $1,500 within 2-3 years.
My long-term price target for the DowJones/Gold-Ratio remains around 1:1. and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold remains around US$5,000 to US$8,900 per ounce within the next 5-8 years (depending on how much money will be printed..).
Fundamentally, as soon as the current bear market is over, Gold should start the final 3rd phase of this long-term secular bull market. The 1st stage saw the miners closing their hedge books, the 2nd stage continuously presented us news about institutions and central banks buying or repatriating gold. The coming 3rd and finally parabolic stage will end in the distribution to small inexperienced new traders & investors who will be subject to blind greed and frenzied panic.
If you like to get regular updates on this model and gold you can subscribe to my free newsletter here.
Nov 25, 2015
Midas Touch Consulting GbR
Florian Grummes (born 1975 in Munich) is studying and trading the Gold market since 2003. Parallel to his trading business he is also a very creative & successful composer, songwriter and music producer.
The Midas Touch Gold Analysis & Strategy Newsletter is free of charge and will be published from time to time as it fits the author's busy schedule.
Disclaimer & Limitation of Liability: The above represents the opinion and analysis of Mr Florian Grummes, based on data available to him, at the time of writing. Mr. Grummes's opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Grummes is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in the Midas Touch. As trading and investing in any financial markets may involve serious risk of loss, Mr. Grummes 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. Although a qualified and experienced stock market analyst, Florian Grummes is not a Registered Securities Advisor. Therefore Mr. Grummes's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. The passing on and reproduction of this report is only legal with a written permission of the author. This report is free of charge. You can sign up here.
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English Translation by Florian Grummes.