Gold short term bearish, long term bullish | 15 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 % Risk
Total allocation 55% (50%)
Physical Gold is a strong 'Hold'
15 January 2021: Gold/US$ appears to be in the process of finishing a final stretch of a complex correction since the 6 Aug 2020 high. The Long term uptrend is well established and has not been broken from any technical perspective. We will first wait for that typical bearish (lower) Risk to (higher) price divergence development in Medium and Long term time scales. Other, more fundamental, developments may also delay any decision to change our core position which benefits from a substantial traditional price cushion. The longer term intermdiate objective will probably kick in around $2,600 which is the parallel line across the 2011 price top for gold. No Change.
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 $2075. Gold is a very important asset to keep as close to your chest as possible in these times of severe financial turmoil and uncertainty. We are looking to add more precious metal as well as selective crypto to our portfolio. The coming days and weeks will hopefully drive a decision. The reason is simple; Either crypto currencies will drive the world market to hyperinflation as an increase of millions of participants in these markets see their net assets to spend grow exponentially, or some kind of hard reset that must include gold and possibly silver, as central banks hold too much of the yellow metal. It cannot be ignored. It is a very low risk long term hold with global debt increasing exponentially. If the western economies tank, gold will still hold its value and it does not matter at what price it was purchased. What matters is what you can do with it and even in the unlikely event of deflation the owner of precious metals will be protected. The cushion on this portfolio is significant and we have yet to see major bearish divergence in the Weekly and Monthly time scales from the larger uptrend that started in Dec 2015. No Change.
Gold 31 Dec 2020 - Quarterly chart since 1971
The early 70's risk weight level in the quarterly Gold/US$ 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
15 January 2021: A similar complex corrective pattern is underway for Gold vs Euro which could stretch into the 1,450 range. A lower price low than the Nov low is likely to create bullish divergence in shoirt and medium term time scales. No Change towards the longer term outlook.
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.
Gold/British Pound live price
15January 2021: GBP has been relatively strong in the Forex market keeping pace with US dollar. The corrective pattern of Gold/GBP is similar to that of Gold/USD and Gold/Euro with similar risk towards a little more price pressure before the short term elastic is pulled back into its longer term driving seat. Gold vs Pound Sterling already nearly touched the same parallel channel through the 2011 peak, but that is unlikely to be a final top as that is likely to be a price top based on logarithmic inflation scale chart. No Change to long term hold for GBP tax based investors.
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.