How Far Will The Gold Price Decline?

January 25, 2017

The price of gold fell from $ 1,876 to $ 1,138 an ounce (31,103 grams) or -40%. Is the price of gold in the trough?

Gold In A Downtrend Since 2012
Since the price of gold has fallen below its 200-day moving average in early 2012, the yellow metal is obviously in a bearish trend. However, we had a very nice bull signal in the gold price in early 2016, when gold rose above its 200dma.

Golden Cross Forms In the beginning of 2016
In early 2012 gold formed a Golden Cross when its 50dma crossed above its 200dma…a technical indicator which is bullish.

The Death Cross Forms At The End Of 2016
However, by the end of 2016 the 50dma crossed down below its 200dma. This pattern is called a mortal cross in technical analysis. In other words it formed a Death Cross…which is self-explanatory. 

Follow The 200dma
For 15 years, my best friend to follow the price of gold is the 200dma. From 2001 to 2012 the price remained above it.  Consequently, I wrote bullish articles about the price of gold. But since the gold price has fallen below its 200dma, I prefer not to write anything. I'm not here to write negative things about my favorite subject, newspapers are enough. It's been seven years since I waited for a bull run (April 14, 2009). Because in the very long-term nothing has changed. For gold it's heading north!

Still A Little Patience Is Needed For gold
Being positive about the industry does not mean buying anytime! For this reason, two supports must be monitored.



Supports For The Price Of Gold

The first support is at level $1050-$1000. This support is also the old resistance of 2008 and 2009. Breaking this support would open directly the door of $700 dollars.

The Second Support
We are not there yet. However, if that happens I will write an article with the following title, "BUY, BUY, BUY". This is the kind of buying opportunity that only happens every 10 or 15 years.

What Medium To Choose To Buy?
$1050 - $1,000 is a very strong psychologically strong support. This price is generally just below the cost of production of many large mining companies. The purchase in this price area is very good.


$700: Now things are clearer! Exceptional buying opportunity!
From the point of view of technical analysis one has to choose one or the other, it is up to you to choose!

Next Topic Bullish About Gold On Horizon?
I like to have a margin of safety become becoming euphoric. Gold experienced an exceptional increase from 2001 to 2012. From the point of view of fundamental analysis, this increase was totally justified. On the exceptional rise, it seems to me as normal that we have an exceptional correction with a final phase of capitulation. I have not yet seen this last phase of capitulation.

Do Not Underestimate The Time Factor
Physical gold must always be put into perspective over the long-term. In the short-term I think the casino offers better odds of winning!

Horizontal Channel possible
If the support at $1,000 does its job, it is possible that gold will fall for some time in a horizontal channel between $1,000 and $1,400 per ounce. For example 24 to 36 months.

Patience
Which ever price scenario you prefer, be patient.

- If this is not part of your qualities, become interested in currency day trading.
- Commodities are long-term investments. You have to wait at the bottom of the cycle, be able to buy when everyone will tell you it's silly.

Conclusions
We are already at a low price zone, which could experience a last wave of decline. This last wave would be unjustified from the point of view of mining fundamentals. But the price of gold is never reasonable.

Technically You Have Different Solutions:

  1. Wait for a technical signal of rise like the passage of the 200DMA or a Golden Cross.
  2. Purchase the support at $1,000 and sell if it breaks.
  3. Market efficiency (or undecided), you buy at fixed intervals over a very long period.
  4. Play the support break at $1000 and buy at $700.
Gold is impervious to rust.

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