The Gold Market Review

October 28, 2016

Market Update

The US-elections are getting close and while mainstream media is already sure about the outcome I think there is still room for a big surprise. Looking at the market it is clear that the participants are not as sure as the mainstream media. Otherwise we would have already seen a sustainable rally in the stock-market. But the S&P500 is moving sideways somehow confirming the recent break of its uptrend-line.

At the same time the goldmarket is struggling to get back on its feet although it could be much lower in regards to the strong US-Dollar. This can certainly be interpreted as some inner strength too. So far the 200-MA has hold and also many of the mining stocks have turned around at this important moving average. But we´re still missing a convincing bounce in the metals and I think we won't get it before the elections anymore. Fundmanagers and market participants surely don't want to have another Brexit moment so they remain either at the sidelines or keep positions small in front of US-elections. You should do the same and not overexpose yourself at the moment. If Hillary gets elected we will get the rate hike in December which is already priced in. If Trump is winning instead the market will have to adjust quite significantly. You will immediately see a weaker US-Dollar pushing gold higher.

So I think in about 10-14 days we should finally see what the market is really up to. If gold is indeed in a new bull market it should start pushing higher in November. Typically you will get one final shakeout before the rally starts. So we could see a quick drop towards $1,240/1,235 before it´s turning sharply higher..

My favorite market again is Bitcoin. Silently and quietly Bitcoin is moving higher. Everyday a little step. It´s now close to $700 again. I am happy that we are up more than 80% here!

The Midas Touch Gold Model Neutral Since 15th Of September

Compared to last week we have five bullish changes:

Gold USD - Daily Chart
Gold in Indian Rupee
Gold in Chinese Yuan
GDX Goldminers - Daily Chart
US-Dollar CoT-Report

Two signals turned bearish:
SPDR Gold Trust Holdings
Gold in $,€, £, ¥

One signal shifted to neutral:
GDX Goldminers Sentment

Here are the model´s latest conclusions:
Bullish: 24th of June 2016
Neutral: 22nd of August 2016
Bullish: 6th of September 2016
Neutral: 15th of September 2016

The model´s conclusion remains neutral. According to this mechanical approach there is currently no trend in the goldmarket and no need to hold any speculative position! Although it doesn't take too much to change the models conclusion to either bullish or bearish I recommend to accept its outcome and remain on the sidelines at least until after the US-elections.

Gold - The Classic Point & Figure Chart

The classic point & figure chart for gold is not looking too exciting here. So far there is no signal that the downtrend has already ended. Gold needs a move above $1,285 to confirm a recovery/trendchange. Prices above $1,330 will turn the picture very bullish.

Gold - Holding The 200MA

Last time I presented two possible scenarios. So far the potential bearish outlook has not gained probability although gold is hanging in there around $1,265 - 1,270 and is obvisouly being capped at $1,275. I guess it is not allowed to rally before the US-elections...

So when in doubt it is always a good idea to take a look at the big picture. Therefore I only have a weekly chart for you today! Here gold has retraced a bit more than 38.2% of the rally from $1,045 to $1,375. This is the minimum condition for a healthy pullback. If it can hold around the current level ($1,250-$1,270) it is showing some real strength and hidden bullish divergence. Looking at the weekly slow stochastic it is extremely oversold and would need another two weak weeks before being able to embed. The much higher probability is a bounce in the next two weeks...

As I have already written if gold is in a new bull market the 200-MA ($1,272) should hold overall. We might get one last intraday shakeout down to max. $1,240/1,235 before gold can finally start its recovery to the 50MA ($1,300). Overall there is a lot of insecurity and indecisiveness in the precious metals sector at the moment which is common at the beginning of a multi-year bull market. After having a strong first six months now the sector simply needs to get rid of all the weak and overconfident hands.

As well the liquidation at the COMEX seems not be over yet. The recent CoT-report is certainly looking much better than a couple of months ago but the commercial short position is still relatively high. I like the fact that the commercials are covering rather fast and now holding a smaller short position at higher prices than five months ago! But the CoT-report is not sending a contrarian buy signal yet.

At the same time most of the mining stocks have given back around 35-50% of their impressive rally. This is just naturally and healthy and it looks like they need more time to consolidate before being ready for the next leg up.

To confirm the uptrend gold needs to move above $1,330/1,335. On the way to this number already $1,300/1,305 is very strong resistance.

On the downside the lower bollinger band ($1,252) has been rising and therefore stopped the bears so far. It is now starting to move sideways building a floor below the current price level but at the same time slowly opening the window for lower prices.

Overall we might look back in a couple of months realizing that the current situation was a great buying opportunity. But we are still missing clear and confirming signals. As we don't know the future I think it´s right to be invested in the sector and slowly start increasing positions but not to overexpose yourself at the moment. Below $1,220 we really have to start questioning gold´s strength. In the bigger picture the midterm price target around $1,500 - $1,530 until will be active again should gold move above $1,325/1,335.

Midas Touch Consulting Portfolio And Watchlist:

No big changes over the last two weeks. Just continue to follow the strategy.

Ether (ETHUSD):

Although there has been quite some bad news flow Ether is holding up pretty well. The big hype and momentum is moving out of this cryptocurrency. Due to the Etherium hack and hard fork there is a lot of insecurity in-transparency and fragmentation which increases doubts about the sustainability of this cryptocurrency. I am willing to give it enough room to breath but not too much. Keep your stop at 10.40 USD and we will lock-in 30% gains in less than 3 months for sure.

Endeavour Silver (EXK):

Endeavour Silver announced some good drilling results on the Terronera property in Mexico and continues to define high grade, silver-gold mineralization. The stock is consolidating the strong move in the first half of 2016. Keep your stop at 3.60 USD.

Brazil Resources (BRI.V):

Brazil Resources remains a buy at current price levels around 2.50 CAD.

Gold Miners ETF (GDX):

GDX did post a recovery but is back down to its 200MA. The correction in the mining sector might continue a bit longer but the the ETF remains a buy at these levels. Keep your stop at 21.00 USD.

Junior Gold Miners ETF (GDXJ):

The Junior Miners did get their bounce too but have not been able to hold these gains. We might see a test of the 200-MA. Keep your stop at 34.00 USD.

Long-Term Personal Beliefs (My Bias)

Officially Gold is still in a bear market but the big picture has massively improved and the lows are very likely in. Gold was able to push above the Januar 2015 high at $1,307 and we finally looking at a series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 - $1,530 and Silver towards $26.00 within the next 8-24 months.

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. 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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© Florian Grummes 2016 all rights reserved

Hohenzollerstrasse 36, 80802 Munich, Germany

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: http://eepurl.com/pOKDb

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Florian Grummes 

Hohenzollernstrasse 36 

80801 München

Germany

E-Mail: info@goldnewsletter.de 

Website: www.goldnewsletter.de

Florian Grummes (born 1975 in Munich) has been  studying and trading the Gold market since 2003. In 2008 he started publishing a bi-weekly extensive gold analysis containing technical chartanalysis as well as fundamental and sentiment analysis. Parallel to his trading business he is also a very creative & successful composer, songwriter and music producer. You can reach Florian at: info@goldnewsletter.de.

India is perennially the world’s largest gold consumer.