Gold offers a premium buying opportunity again | 8 Jan 2020
Gold Price Forecast relative to
Long Term Monthly (LT-M) - Medium Term Weekly (MT-W) - Short Term Daily (ST-D) - and Hourly (not shown) data.
(Previous week in brackets)
|Au Trend||↓ (↓)||↑ (↑)||↓ (↑)|
|Au % Risk
|63 (66)||55 (54)||54 (76)|
Total allocation 55% (50%)
Physical Gold is a strong 'Hold'
8 January 2021: The 2,5% drop this first week of the year after peaking at $1950 is disappointing, but should be seen as an opportunity to acquire unencumbered real physical gold or 100% physical gold backed tokens. Technically Gold is in neutral territory which means anything is possible and it looks like Gold could make another move down and finish the correction that started from the peak at $2075. Gold is a very important asset to keep as close to your chest as possible in these times of severe financial turmoil and uncertainty. We are looking to add more precious metal as well as selective crypto to our portfolio. The coming days and weeks will hopefully drive a decision. The reason is simple; Either crypto currencies will drive the world market to hyperinflation as an increase of millions of participants in these markets see their net assets to spend grow exponentially, or some kind of hard reset that must include gold and possibly silver, as central banks hold too much of the yellow metal. It cannot be ignored. It is a very low risk long term hold with global debt increasing exponentially. If the western economies tank, gold will still hold its value and it does not matter at what price it was purchased. What matters is what you can do with it and even in the unlikely event of deflation the owner of precious metals will be protected. The cushion on this portfolio is significant and we have yet to see major bearish divergence in the Weekly and Monthly time scales from the larger uptrend that started in Dec 2015. No Change.
31 December 2020: 2020 was a good year for Gold with an open to close increase of exactly 25%. This a 25% advance ranks as the 8th strongest performance in 50 years and since that famopus date in 1971 where Central Banks around the world could no longer exchange dollars for Gold at the US Treasury window. The gold price did not explode in 1971 but only finished 16% higher that year. !972, 1973 and 1974 however were bumper years with annual increases of 49%, 73% and 67% respectively. The largest ever increase followed in 1979 with a 125% price increase as the Hunt brothers tried to corner the Silver (Futures) market pushing Gold higher in the process. This Precious Metals Pandemic ended on Jan 21 1980. The technical forecast picture for Gold/USD is largely determined by the Longer term indicators, Monthly Quarterly and Annual (see long term gold charts below) which are all looking bullish.
Monthly is in a downtrend but hasn't yet produced bearish divergence risk weight to price since the 2011 high. Weekly and Daily still in unfinished uptrends supporting the short term direction. What we see during weekends is some selling pressure on Precious metals tokens in favor of crypto. This is indicative of the speculative nature of the entire financial retail market without respecting basic fundamentals. What is happening right now in the crypto currency scene is quite frightening and we know from history that it will end one day. The true value of Nature's money, gold and silver, is still ignored or at least insufficiently appreciated. We believe that financial markets are no longer representing what is happening in the real economy and prefer to largely protected (55% of total assets) with the Precious metals Gold, Silver and Platinum plus 10% in crypto.
Our crypto preference is just Bitpanda's BEST tokens as they represent real value that is backed by a developing and regulated crypto exchange away from traditional fiat currency. We call this one of the Amazon's in the crypto space.
Gold actually had its best year ever in terms of dollar increase. $371 open to close taking out the previous best year which was 2011 with a $318 increase open to close.
In terms of the maximum $ price range for the year, 2020 also beat 2011 by $11, $623 vs $612. Where are we today? Hard to say. Right now we see much movement from traditional assets into crypto. That will eventually reset itself as mainstream media start to cover this market on a daily basis away from Covid. Let's just conclude that owning physical precious metals is the ultimate safe bet in a world that is starting to lean into massive inflation or theoretical stagflation. Why? US M1 Money supply, liquid dollars, in 2020 alone increased by 75% from 4 to nearly 7 Trillion dollars. Think about it! Stay with metals, no change.
Gold 31 Dec 2020 - Quarterly chart since 1971
The early 70's risk weight level in the quarterly Gold/US$ chart below is somewhat distorted due to the 1971 expected and eventual dollar for gold echange window being removed. From 1977 onwards risk weight is calculated with enough data.
In a next quarterly update we will try to add a 120 years chart with risk weight, but for now we cover the recent 50 year market with 'free' price discovery. The Gold price appears to linearly represent the consumer price index, meaning the price is sort of realistic based on that compound CPI number.
The danger lies in 'real inflation'. We sense a hidden parameter that is not yet recognized by financial authorities and the source of which has to do with QE and M1. This is now a universal phenomenon.
I.e something is brewing. As mentioned earlier, developments in the crypto space should be an indicator of what's coming. Which asset classes now classify as a potential 'Big Short' is a tough call and it may take another year or longer to see proper relief from the financial virus that started in 2006 and which has already developed many mutations.
Looking at the quarterly gold chart this time scale cannot not be used to enter or exit positions live positions, but it can be used to determine where we are in a trend in combination with shorter term time scales. Where are we today? We would say quite a long way away from the next historic peak.
Timing wise? It does not really matter.
DDaily and Weekly risk can now only move in a way that the Monthly turns back up again. Sooner or later. The same applies to quarterly which also has a history of developing bearish divergence based on very large price moves.
The 1980 peak: The actual quarterly price high close was in Sept 1980 which represents massive bearish divergence 6 months after the 1979 close at Gold $512 and 5 months after the January $850 peak. Same bearish divergence shows in 2012 and we should expect the next historic peak to be set sometime 3 to 6 months before a technical bearish divergence becomes visible. The risk weight peak can be expected to show a high 90's level which could already be a June 2020 peak at $1768. More likely is a new high peak followed by a lower peak with a price tag several times today's Gold price.
Gold/USD Quarterly risk line chart based on actual quarterly high, low close
Gold risk analysis - Annual chart since 1971
The below time scale annual Gold chart cannot be used for trading of course, but can tell us what to expect in terms of potential price move. In the current uptrend, risk weight is 'up' and hasn't yet shown a 90+ risk level. That tells us we may not see such level until dec 31 2021 or even 2022. We could experience a serious prior price dip and followed by a fresh strong advance.
What is already clear is that the 31/12/2020 risk weight level is 88% and 3 points higher than the risk weight recorded in 2012 (85%)
Shorter term Gold price time scales will provide a solution for sure.
The real takeaway from this Annual chart is that we may be only at 10-25% of the expected price move into the next peak.
Gold/USD Annual risk chart based on actual annual high, low close
Gold/Euro live price
8 January 2021: The short term downtrend that started 7 January is in fortce and may take the price a bit lower. The exact same reasoning applies for wealth preservation investors in all tax jurisdictions around the globe. No Change.
31 December 2020: Gold vs Euro ended the year only slightly deeper than Gold vs US$ due to dollar weakness. Otherwise the picture and outlook for Gold vs Euro is the same. Same strong 'hold'.
Gold/British Pound live price
8 January 2021: Sterling still looks more vulnerable than most other majors. Even though short term indicators are slightly more bullish, GBP is a prime candidate for protection. No Change.
31 December 2020: Just before the year closed GBP was the favoured currency possibly as a result of closing short positions. This Sterling volatility is reflected in the short term time scales which are now showing minor downtrends. This same volatility and directional short term shifts are known to be very unpredictable giving false signals. The fundamental need to own precious metals is clear for any investor in any country. The technical is not clear and looking softer for Gold short term, but the bigger concern is that universal lean to inflation which is so significant that markets haven't begun to react. No Change.
24 December: We expect Gold to perform very strongly versus GBP, even if Sterling gets a temporary speculative boost from a temporary and unwarranted trust in a yet to fully specify this Brexit deal. Gold is a strong 'hold' for Sterling based taxpayers.