Gold – FX – Global – 31 December 2019

31 December 2019, GOLD Quarterly Chart since 1971 – Forecast 2020

Gold/US Dollar, Silver/USD, Gold/Silver Ratio

The next update will follow at the weekend of January 11. Now, the incredibly eventful and often amazing teens are behind us and the twenties are upon us. Anyone in financial markets must be feeling some anxiety as to what the next decade will bring after a massive 12 year glut of helicopter money for banks with unprecedented repo’s of own stock at massively subsidised interest rate levels. 2019 was an eventful year in financial markets with a few scares across all asset classes and otherwise a very strong all time highs finish in most world equity markets.

EYE FOR GOLD endeavours to make a forecast for Gold, Silver and other Global markets based on technical risk weight positions using every day technical tools like Stochastic, MACD and RSI blended with an experienced eye. What we do is simple and also different because we only assume risk away from cash into certain asset classes if that risk is acceptable, thus very low, and in accordance with our policy of making Risk Your Friend, not your enemy.

As strong dealer reaction to perceived fundamental changes can occur almost overnight we prefer NOT to make price forecasts but only direction. Price itself is very emotional and blurs vision. Price can, as we know extend well beyond unimaginable bounderies. The emotional element of price movement is reason for people being stopped out at tops and bottoms so often. Our aim is to protect rather than seeking maximum opportunity but we do have a weakness for Real Money such as Gold and Silver. Protection driven and risk weight investment analysis should only apply to the portion of personal assets that must or should be eliminated as much as possible from unexpected change of market direction risk. What that exact percentage of total assets should be is in the eye of the beholder and will reflect the speculative or opportunistic mind of the individual investor or financial manager. 2019 will have been a very good year for commission earners and we will attempt to not only make a Risk forecast based on which we allocate our positions but also a possible price forecast for Gold and Silver, S&P, Oil, Bitcoin based on commonly known and traditional technical tools. Making a long term Forecast is a tall order and if driven by social sciences usually a lost case. If driven by technical analysis it is also usually a lost case as very few forecasters actually get it right, but at least we look at history price statistics that generally gives better short medium and long term market direction input.


Gold/USD live price, Weekly Gold Price Risk Analysis 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)


Gold/USD LT-M MT-W ST-D
Year-end close 31 Dec 2019: 1523 (1478)
Trend ↑ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
84 (81) 55 (23) 95 (70)
Allocation 100% (100%)

“Trust in our globally controlled monetary system has taken decades to arrive on foot. That trust will leave on horseback”

Gold has begun to shine again during the last 4 years and this includes central banks embracing the yellow metal again. As we follow the market generally from short term Daily to long term Monthly, for this gold price forecast update we’ve included a chart of gold price and gold risk weight that never really shows up as a piece of analysis equipment in Gold Forecasts and which at times can become very relevant indeed, especially for Long term investors although Medium term investors can also benefit tremendously from this simple extra market analysis tool. It is Gold Risk weight in the Quarterly time frame as shown in the chart below. The Gold risk weight is measured based on the actual highs and lows during the Quarter, although the line price chart only shows the quarter end closing prices for Gold. Gold Risk weight always measures where a market trades relative to its price range. The benefit from using this very long term Gold forecasting tool is that it can create confidence and induces patience. Patience in financial markets is difficult for most investors or traders, although impatience or even ‘panic’ can at times be the right actionable attitude.

So let’s examine the Quarterly Gold chart versus the US Dollar and Risk weight for the period 1971 to 2020 and how can it assist with our Gold price forecast:

QUARTERLY GOLD CHART 1971-2020 AND RISK WEIGHT ANALYSIS

The chart above starts the quarter ending Sept 30 1971, Gold had just began an early catch up with reality following the Friday, August 13, 1971, doomsday at Camp David, which preceded ‘the unpeg announcement’ 2 days later on Sunday August 15, 1971. The Gold Standard was ‘No More’.
Interesting observations are:

  • The series of lower risk weight tops corresponding to lower price tops between Jan 1980 and Dec 1995
  • The Bullish risk weight divergence to price low in 2001
  • the 8 years it took from 2003 for the Quarterly risk weight to finally peak in 2012 (the price high of course occurred in Sept 2011, but the technical top coincided with the time of price top against the Euro)
  • The absolute unknown as to where prices may go whilst the LT risk weight trend is still advancing

What we can confirm is that in each of the major oversold or overbought conditions on this Quarterly chart over nearl 50 years, the LT Monthly and or MT Weekly either confirmed an imminent reversal or drove the market into strong divergence indicating a continuation of trend. What this type of timeframe analysis does is measure true risk whilst it will hardly ever pick the actual top or bottom. The good thing is though that it always prevents from taking major positions against the risk weight trend. Thus whilst the Quarterly risk weight trend is up we must be patient and accept the short term ebbs and flows of shorter term cycles.

Based on the trend patterns since Dec 2015 we would expect the major players to have accumulated Gold to somewhat higher than average levels as confirmed by the World Gold Council in a recent report , but probably still insufficient given the discrepancy with the extreme level of quantitative easing the past decade. Many ‘friends of gold’ type investors, typically High net worth, have been accumulating as well but Mainstreet remains underinvested as usual until they come in during the final 20% of a major advance. An overbought daily risk weight may pause the current long term rally and the strongly trending Weekly MT should limit a drop in prices.
As for Price objective the only way we know isn’t very good, especially when timing future cyle dates, but at least gives some comfort on the price horizon. Fibonacci ratio’s are just a guidance and we would base it on the entire move from
say 1913 to 2020 whereby the Jan 1980 high is calculated based on the quarterly highest print of 667 coming from $20.67 (1st Gold standard peg). This makes the reversal into the 257 2001 low a near 63% correction. From 257 to the high print of 1776 in 2012 is $1519. That is a Long term advance of 235%, which is also near the Fibonacci 233 sequence number. We usually only know in hindsight whether a Fib ratio is applicable to an achieved price of time objective. So, it always remains highly speculative to choose a reversal point based on Fib alone. Risk weight as we have learned to apply it is a lot more secure and thus gives better comfort and confidence to stay with a trend fully or partially or indeed get out of a market position. Now, based on this Fib ratio alone an objective could be the more extreme objective of 2.62 x the entire move to 2012 = a price target of $4,571 OR even 4.326 times the entire move to 2012 = a price target of $7.549. The only reason why an insane objective makes sense is the insane market background that could easily and quickly generate a massive dive in trust and strong appetite for this type of insurance.

Another interesting observation is the Quarterly Standard deviation as per the chart below:

With a modest quarterly deviation from mean of $105 risk remains well within the maximum margin from entry, and without the typical shorter term risk weight highs being confirmed with a bearish divergence risk weight to price we remain fully invested. No Change.

Last week: The technical picture remains focussed on the risk weight divergence between Weekly and Monthly. It is not until the stretch in risk weight between these two time frames is much smaller that we can consider a temporary adjustment to our holding (EUR based) since Q4 2018. No change for now and remain fully invested in Gold


Silver/USD live price, Weekly Silver Price Risk Analysis 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)

Silver/USD LT-M MT-W ST-D
Year-end close 31 Dec 2019: 17.74 (17.16)
Trend ↓ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
65 (63) 40 (13) 82 (68)
Allocation 100% (100%)

Silver price 2020 Forecast. Our prediction for 2020 holds

SILVER PRICE RISK WEIGHT ANALYSIS 1971-2020

Silver is in a similar position as Gold with one big difference and that is the Risk weight position as shown on the above Silver quartyerlty analysis chart which we add as a bonus at the start of 2020. We seem to be the only ones in the technical analysis space running this type of Long Term analysis on Silver and Gold and this can be extremely helpful, even in the relatively short term, to retain trust in the position that we’ve taken. There is a massive lag with long term chart and therefore any divergence vis a vis Monthly and Weekly risk weight much be watched carefully. As we know from history and our own experience, market trends, up or down, can last for a very long time. The Long term quarterly Silver risk weight is in an uptrend and, potentially, has a long way to go. This is the type of indicator level that tells us the Gold/Silver Ratio goes to equilibrium and confirms the old adage; ‘Markets ALWAYS return to their equilibirium at some point’. Whilst the quarterly Gold/Silver Ratio goes to equilibrium and confirms the old adage; ‘Markets ALWAYS return to their equilibrium at some point’. Whilst the quarterly Gold Risk weight has already advanced into the 80’s range, yet in an unmistakable uptrend still, and Silver ending the year 2019 at a risk weight level of just 52, there is a gap in momentum.
The Silver price, for some unknown reason, still shows that underlying hesitation which causes some other social science forecasters, so we’ve read, to even see silver staying at this level whilst gold goes up. A very unlikely scenario in our view and a bet against Silver looks like a suicide mission for that investment. Moving more cash now into physical silver should be excellent insurance over the next several years. We confidently remain fully invested as the MT Weekly sets the more bullish tone and still needs to develop a bearish divergence which we havent seen for several years.

With MT risk weight having turned bullish following the expected ST price recovery we stay focussed on our long holding. The LT risk weight is only at 63. A bigger push from the MT is more likely and can easily turn LT into a positive trend again with some way to go. No Change


Gold/Silver Ratio live price, Weekly Gold/Silver Ratio Price Risk Analysis 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)

GOLD/SILVER Ratio LT-M MT-W ST-D
Year-end close 31 Dec 2019: 84.62 (85.72)
Trend ↓ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
41 (42) 57 (80) 23 (30)
Allocation 50/50 AU/AG (50/50 AU/AG)

With the Monthly trend turning down at year-end, the ratio is still favoured to stay weak. No Change.

Last week: No Change


FX 2020

USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR, Bitcoin

On Dec 20 we added the USD/Japanese Yen currency pair to our analysis as it is the second largest currency pair in international fx markets.

USdollar Index Weekly Dollar Index Price Risk Analysis 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)

USD Index LT-M MT-W ST-D
Year-end close 31 Dec 2019: 97.69 (97.69)
Trend ↓ (↓) ↓ (↓) ↓ (↑)
% Risk
Weight
63 (68) 19 (32) 22 (48)
Allocation 100% (100%)

Last week:The Dollar Index is now more rapidly developing weakness in trend and risk weight. A possible bullish divergence in the daily time frame could cause a pause in the move that started again in September. Given the bearish divergence sequence in the MT weekly between April 2018 and Sept 2019, we’d like to see a serious oversold risk weight coupled with a bullish divergence to start thinking a little firm on the USD. Patience is what we need. This could last for quite some time. No Change

EUR/USD FX live price, Weekly EURO vs US Dollar Price Risk Analysis 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)

EUR/USD LT-M MT-W ST-D
Year-end close 31 Dec 2019: 1.1213 (1.1076)
Trend ↑ (↑) ↑ (↑) ↑ (↓)
% Risk
Weight
33 (22) 76 (61) 82 (55)
Allocation 100% (100%)

The Euro has been expecting to go stronger and it slowly has. Just before Year-end 2019 EURO broke above 1.12 resistance and closed there. A signal that this move is not over even though there is apparent contra-weight in the market keeping the dollar from falling out of bed. No Change.

Last week: No Change


Cable GBP/USD FX live price, Weekly Sterling vs USDollar Price Risk Analysis 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)

GBP/USD (Cable) LT-M MT-W ST-D
Year-end close 31 Dec 2019: 1.3250 (1.2980)
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
71 (59) 70 (83) 45 (25)
Allocation 100% (100%)

Cable remains part of our primary dollar trend and risk weight direction. Last week’s sharp drop from 1.33 to 1.29 was reversed into an equally sharp rally back to 1.3250. No Change.

Last week: We expected a pause in the GBP rally given its strong momentum during the UK election campaign and before. GBP might drop an other 2 points before recovery sets in. This is the technical picture which can be reliably adopted as a risk management approach. No change therefore in maintaining a fully covered dollar receivable hedge


USD/JPY FX live price, Weekly USdollar vs Japanese Yen Price Risk Analysis 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)

USD/JPY LT-M MT-W ST-D
Year-end close 31 Dec 2019: 108.72 (109.39)
Trend ↑ (↑) ↓ (↓) ↓ (↓)
% Risk
Weight
44 (41) 83(82) 35 (80)
Allocation 50% (50%)

We shall wait for the minor short term downtrend, and which is quite rapid, to finish before deciding on the next level of allocation. For now we stay with 50% dollar cover of long dollar transaction risk.

Last week: This is a first time analysis. It looks like we would have been marginally long dollars since middle of September or early October following a bullish divergence in the Medium Term time frame and a bottoming and possible turning action of the LT time frame. As both ST and MT have turned down from a relatively high risk level we believe this is the right moment to immediately turn this around and establish a cover for dollar receivables at 50% of transaction risk.


GBP/EUR FX live price, Weekly Sterling vs EURO Price Risk Analysis 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)

GBP/EUR LT-M MT-W ST-D
Year-end close 31 Dec 2019: 1.1812 (1.1700)
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
83 (75) 68 (85) 29 (20)
Allocation 50% (50%)

GBP Euro still does not look like it wants to resume the extraordinary uptrend that was driven by the looming Brexit. Hesitation in LT Monthly trend at near overbought with pressure on Weekly are driving indicators that caution is desired. Our 50% cover for Euro currency based GBP exposure remains. GBP balance sheets to preferably take a larger cover even (70% or more) on short EURO transaction exposures.

Last week: In spite of bullish divergence developing between ST and MT GBP/EUR sees LT pressure even though LT is still in uptrend. With weekly having turned down and the large cushion from existing position plus opportunity profit we choose to stay with 50% cover on short GBP exposures for EUR based companies whilst staying fully covered on short EUR risk for GBP companies


BTC Bitcoin Price, Weekly Bitcoin Price Risk Analysis 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)

BITCOIN BTC/USD LT-M MT-W ST-D
Year-end close 31 Dec 2019: 7195 (7187)
Trend ↓ (↓) ↑ (↑) ↓ (↑)
% Risk
Weight
41 (47) 23 (19) 55 (55)
Allocation 0% (0%)

Thsi market is still too young to make any serious long term prediction. I see stuff on the world wide web that just doesnt make any sense with Long term predictions that simply have no basis for being considered serious. There is zero social science evidence that BTC or any other crypto is going anywhere except that gaps are still likely to be filled, just like any other market and the only gap left is at 2828, in our view. Little volatility last week for a change. If the short term history of Monthly BTC data is anything to go by, there is support at 4560 with upper resistance at 11670. We’ll probably see one of these target reached within a few months and that kind of volatility is not a risk play. So, No Change but we keep following it.

Last week: This market remains highly speculative. LT in downtrend slowing down and possibly moving up as a result of an upturn in the MT risk weight trend. ST however is spurting up within a relatively narrow price range. Relative as the movements remain pretty volatile for members of the traditional investment community, with whom we identify ourselves. Thus far our stand down has been driven by risk aversion at any cost (of opportunity). No Change

Remaining ‘Gap open’ (July 2017) still to fill at 2828. We exclude weekend action to determine opening gaps as major players are(were) not participating in size during weekends.
If this market is poised to turn from extremely overbought (Dec 2017) to completely oversold, it doesn’t appear to be finished.


GLOBAL 2020

S&P500, Brent Crude Oil

S&P 500 Weekly Standard & Poor’s 500 Price Risk Analysis 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)

Standard & Poor 500 LT-M MT-W ST-D
Year-end close 31 Dec 2019: 3219 (3223)
Trend ↑ (↑) ↓ (↑) ↓ (↑)
% Risk
Weight
96 (97) 96 (96) 83 (97)
Allocation 0% (0%)

Is S&P500 worth the risk???

S&P 500 QUARTER EN PRICE AND RISK WEIGHT 2010-2020

A mild correction started right before Year-end 2019 with MT weekly reversing at the same 96% overbought risk level as the previous week.

We stay out of course as nothing points towards a low risk entry. This will take some time to develop if at all within the foreseeable future. What we can expect is that ST Standard deviation is small given the narrow and steady price advance into new highs for many months. Of course not knowing what type of intervention can still take place, the highly profitable year end close could drive some rapid profit taking. This is an extremely high risk market and not for the faint hearted. This kitchen is simply too hot for us. No Change.

Bonus chart: Here is the same Long Term Quarterly Chart for the Dow Jones Industrial Index from 2010 to 2020 including our Risk Weight levels

Dow Jones QUARTER EN PRICE AND RISK WEIGHT 2010-2020

Last week: This week we have abandoned the Dow analysis because it is so close to that of S&P whilst the S&P500 has a broader impact on world markets which still seem to largely follow the USA. We are out of this market since Q3 of 2018. We’ve seen a major drop and another major rally into new all time highs. Everything technical is simply very high risk and history has learned that it is better to lose the final 10, even 20% of a move than being trapped in a reverse that has no liquidity. When all time frames are 95% plus something is going on and one should not challenge that kind of risk with any significant portfolio allocation. Pure spec is another matter although right now even that is ‘risk off’. No Change


Brent Crude oil Weekly Brent Crude Oil Price Risk Analysis 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)

Brent LT-M MT-W ST-D
Year-end close 31 Dec 2019: 66.03 (66.03)
Trend ↑ (↑) ↑ (↑) ↓ (↓)
% Risk
Weight
35 (35) 72 (72) 72 (72)
Allocation 0% (0%)

Brent has become a short term play only and is now channeled by a narrowing triangle formation with resistance at 68 and support at 58. LT Monthly is up but hesitant, MT Weekly is strong up by 20 risk points and daily has turned down. This looks like a further pause for finding directiom which is hard to predict. If Downtrend resumes we are potentially looking sub 40 with LT resistance at 86.00. We stay out. No Change.

Last week: Oil prices look like they are behaving as if the world economy is in the best shape ever. Technical evidence however is not confirming. ST keeps getting into high risk range whilst we still haven’t seen a real bullish divergence bottom in the MT and LT times frames. This is enough reason to remain very suspicious of the MT price range. The triangle formation since the high of Oct 2018 could continue for a few more months and then either turn sharply up or down. Since it is impossible to detect a clear trend based on risk weight we continue to stay on the sidelines. No Change

Posted in A - All Financial Blogs | 2020 Forecast.

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