Gold USD is building a higher support level | 31Jan 2021
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 remains 'Risk on'
31 January 2021: The January close on Jan 29 was slightly lower at 1846. This major asset class will be influenced by developments in the crypto space. As funds appear to moving more between speculation and safety by smaller investors. Our observations on markets with runaway and breakaway gaps has a bearing on Gold because we see several gaps still open since mid 2020 in the Gold/Bitcoin price ratio. That ratio has obviously dropped with rocket speed toward a recent low of 0.045. As we explained earlier in the week here an attempt to fill those gaps can be made and are even very likely in spite of the most recent Bitcoin embrace by Bridgewater. The market ultimately decides and forces can be strong in either direction. What this means for Gold in its own right is hard to predict, but we remain very positive and fully committed to our long gold position as long as medium and long term risk weight haven't even begun to approach technical bearish divergence. No Change.
22 January 2021: The gold market was up 1.5% for the week and appears to be feeling pressure from the extremely buoyant crypto space, so we ask the question; Will gold benefit from a crypto currency correction? We analyse this in our Crypto section. Gold is still looking slightly vulnerable with Weekly risk weight in a stronger neutral level downtrend whilst daily risk points up. Neutral means the market can turn any moment. For us, the critical observation is for the longer term time scales to develop bearish divergence. This always happens towards intermediate and final tops in the Medium term weekly time scales and usually the Long term Monthly and even quarterly time scales. We have yet to witness such a formation. It did happen during the first two gold price expansions since the Dec 2015 bottom, but has not happened yet since the August 2018 bottom. The fact that we are hovering some 50% above that August 2018 bottom, indicates there's more to come. It is tempting to discuss fundamentals for potential inflationary pressures that could lift gold to an an exponential level, but for now we stick to a simple chart observation. Risk weight is fairly indecisive, so any short term pressure should not lead to rejection of the longer term 'strong hold'.
The Quarterly risk to price chart above shows risk dropping to 78 with minimal price change. This is an interim quarterly Gold risk position at the close of January 2021.
This chart cannot be used for timing investment decisions or trading. The observation is that we may well saee several peaks during a much larger price advance, similar to longer periods in history.
Gold/Euro live price
29 January 2021 close: Gold looks a little stronger against Euro than against USD short term, indicating a possible strenghtening of the greenback. The longer timescale risk trends are down at this moment combined with relatively little price change. No Change.
22 January 2021: Gold vs Euro behave very similar although we did see bearish divergence develop on the Medium and Long term time frames. Risk weight levels however are much lower than the price and risk peaks reached earlier in this cycle and that makes a more serious downtrend highly unlikely. Shakeouts ion certain world events can always happen and are usually short lived. We happily stay with gold in this wealth preservation strategy.
Gold/British Pound live price
29 January 2021 close: GBP has been remarkably resilient with traders looking to buy sterling on any dip. As this continues Gold looks technically a little weaker against GBP, but the broader picture still points towards a much weaker Pound sterling in the medium to long term. This has become a tougher call but unless 1320 breaks decisively we remain a strong 'Gold hold' for Uk based investors.
22 January 2021: Sterling has recently benefitted from unknown forces pusdhing the currency a little higher in Forex markets. This is now creating stronger correction in the longer term time scales whilst Gold still trades just under 85% above its 2015 low. Technically we may not have seen an intermediate price low, but trading against a very fundamental long term risk without having seen a bearish divergence in those same longer term time scales isn't good wealth risk management.