Will Gold/USD make a serious correction? | 31 July, 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
|94 (94)||95 (93)||91 (94)|
|PT Trend||↑ (↑)||↑ (↑)||↓ (↓)|
|Pt % Risk
|57 (57)||81 (80)||71 (88)|
|Allocation||Pt:30% Au:70% (Total 100%)|
Gold/USD live price
These are not normal circumstances and the strong advanced of gold moving through the previous all time high without any hesitation tells us it is very different this time. The 500 dollar rally in just 4 months is only a hair larger than the May-Aug 2011 rally, but this time, long term risk weight has not shown successive tops with bearish divergence yet. Even though all time frames show very high risk, we are wise to respect this market’s direction especially with a more noticiable disparity between physical and paper metals. The gold price can easily pause and retrace, but the risk of only mild bullish divergence causing further massive advance is substantial. Precious metals are telling us that trust in fiat is waning.
Platinum made its initial move but again paused its intended catchup with Gold. It is a matter of when not if, so we stay we this 30/70 mix and fully invested until long term signals give serious risk of massive correction.
24 July:: The Precious Metal space had one if its best weeks ever with Gold up 100 dollars last week and settling at 1898 after the London PM fix at an all time high of 1902 taking out the August 2011 pm fix highs at 1895. Whilst all our time frames are in overbought territory we must now first see bearish (higher price to lower risk) divergence in the MT and Long term time frames before calling a top. This is still weeks away and we can see some more volatile action reaction markets. Whilst gold hasn’t yet taken out the all time intraday high tick at 1920, this new all time high pm fix is probably more significant and will add to a fear of a necessary reset. Is that fear justified? Yes it is. Fiat money is at a crossroads of finding continued existance in a new economic order and being fully digitilised. No one knows what will happen and we are sure various impossible yet creative scenario’s have already been discussed amongst elite peer groups. Early last week we invested our 30% Gold risk divestment into Platinum. Platinum is still fundamentally forecast to be weak but this us all about industrial use. Arguably Palldaium follows the Tesla stock and Platinum the opposite. PT however is as good as gold and always has been. It is a much smaller market with western supply coming almost entirely from South African mines. This metal needs to be rediscovered and once it does it will rebalance at a normalised level vis a vis gold. Platinum usually either precedes or follows silver which has been equally weak against Gold. Next week we will update on the Gold Platinum ratio risk weight against the chart patterns shown below. With Gold landing at this all time 2011 high level there is always a risk of pause and volitile profit taking as daily prints a slight down trend in a highly overbought range. This will be temporary. As more speculators may switch a few percent of their gold to Silver and Platinum in anticipation of a strong ratio adjustment.
Gold/USD, once it flies into uncharted territory, eyes an initialy objective of 2500 on a normal linear scale.
Platinum/USD turned down in Daily time frame. Initial object is the 1041 high recorded in January this year. The subsequent crash to 600 shouldn’t have happened as evidenced by the massive bullish divergence in the Monthly time frame. This market has only just started in spite of industry bearishness. A series of closes above 1040 opens a low risk premium trade towards the 1500 level. No Change in holding our newly preferred Gold Platinum spread investment.
Platinum/USD live price
(Previous week in brackets)
|Trend||↑ (↑)||↓ (↑)||↓ (↓)|
|74 (75)||92 (93)||73 (90)|
Silver/USD live price
24 July:: Silver rallied over 15% last week peaking briefly at 23.25 on Wednesday and holding these higher levels. the daily runed down again but at a higher risk level meaning we should first see bearish divergence in this short term time frame to warrant a more serious short term pause or correctio. This market is unlikely to stop its advance until we see a medium term correction type divergence. Looking at the chart formation and risk tools, this will be at least one or 2 months away.
GOLD/SILVER Ratio Price Risk Analysis
(Previous week in brackets)
|Trend||↓ (↓)||↑ (↓)||↑ (↓)|
|38 (40)||7 (10)||28 (27)|
|Allocation||50/50 AU/AG (50/50 AU/AG)|
Gold/Silver Ratio live price
24 July:: We continue hold our bearish view on the Gold/Silver ratio favouring Silver in our portfolio and still aiming for that more recent equilibrium level of 60-65. Many of the silver bugs still visualise that historic equilibrium of 10-15, but for now this looks highly speculative. Any reset should probably include silver as money and possibly also a digital alternative to a basket of major fiat currencies. We have a clue how it can be resolved as discussed previously but absolutely no clue as to what will actually happen. As we ride a geo-politcal mess anything is of course possible and we are currently living on a very speculative and dangerous platform called planet earth. So, we’ll stick to the charts that at least give us some direction. If we look at Tesla, Amazon, Facebook and Palladium to name a few, we can see what is possible in a world that appears to going berserk. There are bubbles to be pricked and Gold/silver may already have seen that. As we see Platinum more as a Gold space commodity we will continue to separately comment Gold/PT and Silver. No change in maintaining a balanced spread between Silver and Gold/Platinum.