Gold Market Review

Market Update

Gold still moves within its sideways channel between $1,225 and $1,262. Since mid of February this sideways consolidation has been doing anything but to confuse market participants. I am not sure how much longer this will continue but experience tells me that before every major up move Gold usually shakes out most of the traders with a fierce pullback. Now that we are approaching May the seasonal pattern clearly points to lower prices. The worst case scenario is a sell off down do the rising 200 day moving average around $1,140. But already the well established support zone around $1,180-1,190 could very likely become the launching pad for a violent gold rally towards $1,500. Timing-wise I expect this rally to start end of July or early August. The $1,500 target is possible until spring 2017. 

My call to buy physical silver below $15 came right in time and we are already up nearly 15%.

This summer should bring us a dip in the precious metals sector and a good chance to buy Gold, Silver and the miners. Just be patient.

Overall, the surprise will be on the upside in all markets. I expect inflation to rise dramatically over the next 12-24 months. But short-term the US-Dollar seems to be ripe for a multi-week recovery or some form of a bounce which should put some pressure on precious metals, commodities and probably the stock-markets.

The Midas Touch Gold Model neutral since March 14th

Compared to my last public report we have only one new bullish signal:

US-Dollar Daily Chart

Two new bearish signals are coming from:
SPDR Gold Trust Holdings
Gold in $, €, £, ¥

One signal has shifted to neutral:
GDX Goldminers Sentiment

My model has been neutral for more than five weeks now. Its conclusion remains to stay at the sidelines.

Gold´s consolidation could morph into a correction but the mantra remains to buy the dip

It´s been more than 10 weeks since gold finished its explosive move to the upside. Since then all we got has been a confusing sideways consolidation around $1,250. Without a doubt gold has been holding up very well and still makes a strong impression. But the combined support of the 50MA ($1,237), the grey neckline ($1,224) and the lower Bollinger Band ($1,214) is eroding slowly. The rising 200MA ($1,144) is still way below the current price level. And according to the latest CoT-report smart money hedgers are holding the largest bet against gold since November 2012. Now that spring is approaching May typically is a pretty weak month for Gold. Therefore I don't see any need to chase the metal here. Instead my main scenario remains a pullback towards $1,180 - 1,190 and I am pretty sure that the market will pay us for our humble patience.

On the upside gold needs a clear and decisive close above $1,262 to end this sideways consolidation. In that case the next target zone around $1,325 - $1,345 should be met rather soon followed by a larger pullback. 

Action to take: Buy the VelocityShares 3xLong ETN (UGLD) below $10.00

Stop Loss: $8.50

Profit Target: $18.25

Timeframe: 8-10 months

Risk ($1.50) / Reward ($8.25) = 1 : 5,5 (very good ratio)

Position Sizing: Don´t risk more than 1% of your equity

Investors should buy physical gold with both hands if prices move below $1,150 again until you have at least 10% of your net-worth in physical gold and silver.

As you know I have been pretty bearish during the last couple of years. Although I was always expecting lower prices I gave you clear buy limits for physical gold. Following my recommendation you could buy below $1,250, below $1,150 and even below $1,050 during the last three years. I have added these purchases with an average price of $1,150 to the portfolio.

On a side-note, silver has finally joined the part.. But don't forget that the white metal always is late in the cycle. Here too commercial hedgers are heavily short and a deep retracement towards $15.50 - $16.00 would be no surprise. The recent rally stopped at the falling upper Bollinger Band on the monthly chart. It was clear that silver had no way to go but lower... Buy physical silver with both hands whenever prices move below $15.50 again. The Gold/Silver-Ratio has topped and silver has a huge potential over the next couple of years. I recommend to split your full physical precious metals exposure into 2/3 in gold and 1/3 in silver.

Portfolio & Watchlist

Long-term personal believes (my bias)

Officially Gold is still in a bear market but the big picture has massively improved and the lows are very likely in. If Gold can take out $1,307 we finally have a new series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 within 1-3 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. 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

Hinweis gemäß § 34 WpHG (Deutschland):

Mitarbeiter und Redakteure des Midas Touch Gold Newsletter halten folgende in dieser Ausgabe besprochenen Wertpapiere: physisches Gold und Silber, Bitcoins sowie Gold-Terminkontrakte.

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Herausgeber und verantwortlich im Sinne des Presserechts / inhaltlich Verantwortlicher gemäß §6 MDStV 

Florian Grummes 

Hohenzollernstrasse 36 

80801 München

Germany

E-Mail: [email protected] 

Website: www.goldnewsletter.de