The Midas Touch Gold Analysis & Strategy Newsletter
Gold & Silver Update 17th of August 2015
Posted Aug 19, 2015
1. Gold & Silver Update
Since my last update Gold posted a recovery. So far it's not very spectacular but it's holding above $1,115 as I am writing this. The Mining Stocks (GDX and GDXJ) really exploded higher from their bottom on the 5th of August. I don't think that Gold already made its final low. The recent price action simply is not encouraging enough. Looking back in history the bottom usually is a process lasting at least a couple of weeks. Therefore Gold should come back below $1,100 soon or later and make one more lower low. As you know my target zone ranges between $1,035 and $980. Certainly the sentiment has been super bearish and Gold is a wonderful contrarian play here but the last weeks in any large movement (up & down) are usually characterized by extreme irrationality and exploding volatility. On top I think the market simply wants to see the $1,000 level - no matter whether this makes sense or not - it´s pure psychology. Therefore I remain optimistic that we will see the final low within the next couple of weeks. If Gold instead continues to recover (signal is a daily close above $1,126/$1,130) the bear market will very likely extend into next year....
During the last 15 days the Mining Stocks as well as Silver have been starting to outperform Gold. That is a positive sign and increases the probability that we have seen an important bottom in the sector. I personally believe that the miners have already bottomed while Gold still has unfinished business on the downside. It's up only 1.35% from the lows on July 24th. Not a very encouraging price action... The miners instead posted five strong up-days with impressive gains and are about to close the gap they had teared on the 12th of August.
2. The Midas Touch Gold Model
Last Wednesday, the 12th of August, my model went into a buy mode for the first time since mid of March. It is still a weak and slow buy signal but it is a buy signal. The change in the US-Dollar Daily Chart was the final trigger. But the trend in the US-Dollar ist not really clear at the moment. This signal is changing back and forth showing no sustainability here. Besides that we have a new buy signal for Gold USD-Daily Chart, Gold in Indian Rupee, Gold in Chinese Yuan and the GDX Goldminers Daily Chart.
The SPDR Gold Trust on the other hand continues to loose its holdings.
Overall the model is in Buy/Bull Mode.
3. Gold Daily Chart
My expectation of a more or less immediate continuation down to $1,035 has been wrong. Instead Gold posted a recovery towards $1,126, but failed to regain the "flash-crash" level above $1,130. Overall Gold is still in a bear market and below most of its downtrend lines and below the 50MA ($1,141) and the 200MA ($1,187). The stochastic is already overbought while the MACD has posted a new buy signal. The RSI has recovered to neutral levels. Generally all indicators do not stand in the way for another down-wave. To me the recent price action does not look like the start of a new bull market yet. Instead the market is doing everything to confuse everybody. Overall Gold is hanging in around $1,115 not being able to make any significant progress. A daily close below $1,106 will confirm the start of the final down wave.
Traders should wait on the sideline here as there is no clear bullish setup while the more likely bear-side does not deliver any reasonable risk/reward ratio. Instead continue planning how to act once Gold goes below $1,050 to build a long-position which you can ride for at least a couple of months into a larger bounce/recovery/start of a new bull market.
My recommendation for investors is to buy more physical Gold below $1,050 and below $1,000 (should we get there). The risk/reward is already outstanding but you need to bring at least 3-5 years of patience with you.
I also do recommend to start buying Mining stocks on any pullback in the next couple of days/weeks. The preferred vehicle should be an ETF like GDX or GDXJ. Once the turnaround is getting more clear I might start publishing interesting stocks that have great fundamentals, an outstanding management and a very good technical setup. As you know mining stocks tend to rise only 20% of their time therefore I prefer buying into an uptrend instead of catching a falling knife. One might miss the first 10-20% but you reduce the downside risk dramatically.
4. Long-term personal believes
The return of the precious metals secular bull market is moving step by step closer and should lead to the final parabolic phase (could start in summer 2015 or 2016 and last for 2-5 years or even longer). Before this can start Gold will need a final selloff down to $1,050-$980. 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.
Fundamentally, as soon as the current bear market is over, Gold should start the final 3rd phase of this long-term secular bull market. 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.
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Aug 17, 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.