Will Gold benefit from correcting crypto? | 22 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 (62)||45 (55)||70 (35)|
Total allocation 55% (50%)
Physical Gold is a strong 'Hold'
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'.
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.
Gold/Euro live price
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.
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 short and medium term time scales. No Change towards the longer term outlook.
Gold/British Pound live price
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.
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.