Gold Forecast: Gold Price Starts The New Year With A Bang

Gold continued to show strength towards the end of January and is now up by over 5% for the first month of 2016. However it is now running in to heavy resistance, we think there is room to push on towards the $1140 region but it should be short lived.

We expect price to fall back towards the $1100 area and consolidate there for a few weeks before resuming the long term downtrend, at present we see still view gold as being in a bear consolidation with lower lows to come.

Below is an historical gold oil price ratio chart, we have been forecasting the oil price with some success in the last few months and have been carefully monitoring this ratio. Currently an ounce of gold buys a near record number of barrels of oil as far as we are concerned this is an unsustainable level for gold assuming we are not entering an “it’s different this time!” phase.

From the chart below you can see the parabolic nature of the recent move, mostly as a result of the collapse in oil over the last couple of years, at a minimum we would expect to see a consolidation of this ratio at a lower level.

With the global economy lurching from one crisis to another the signs of a slowdown that have been flashing red for at least the last couple of years, from emerging market stress, collapsing peripheral currencies to collapsing commodities seem to have finally entered the public consciousness. As a result we expect the crises to deepen in the near future which in our opinion means a continuation for the time being of the above trends which means cheaper commodities and more than likely cheaper gold.

Gold price continues to outperform silver and has done since the silver top in 2011, currently silver is at a relatively extreme undervaluation in relation to gold on an historical basis, however there is room for this trend to continue and at present there are no signs that silver will begin to outperform gold.

In a genuine precious metals bull market we would expect to see silver outperform gold or at least be valued at a less extreme ratio.

Gold however continues to hold its own against the S&P 500, we are watching this ratio carefully to see if this extreme underperformance since 2011 is coming to an end. You can see from the chart below how weak gold has been in relation to stocks for decades in comparison to the 1970’s precious metals bull market. 

For now we remain bearish gold and still expect lower lows in the near future, over the long term we remain bullish and it is our opinion gold is completing a long and painful consolidation after a decade long bull run. Things that go up a lot need to consolidate and have a rest before resuming the dominant long term trend.

These patterns occur all the time it’s a natural phenomenon but it is painful for investors when these patterns take years to play out rather than just months.

We now create forecasts for a wide range of markets, stocks, commodities, forex, interest rates and energy along with gold using our unique forecasting logic that has kept our followers on the right side of the gold market for so long.

Ken Ticehurst

We have a free subscription service, we send our subscribers a forecast every weekend. To view some of the most accurate and unique market forecasts available sign up at: http://www.kenticehurst.com