Gold Forecast: One Swallow Does Not A Summer Make

A positive week for gold last week…but still just about within our forecast range on a closing basis, as we have mentioned before we expected volatility and nothing within the last few weeks has altered our longer term forecasts. The month of January closes on Tuesday, this for us is a significant event and we see a great deal of the recent volatility being as a result of gold needing to make a significant end of month close either confirming it is in a downtrend or showing us it is potentially trying to change trend.

It is amazing how quickly the gold bulls stick their heads above the parapet and declare victory before the dust has even settled. We have been hovering around $1200 for what seems a lifetime which begs the question, why are we at these valuations and not at £2000 like so many of the bulls have been forecasting over the last couple of years.

The answer is that gold is simply not as attractive to the public as the bulls think or the fundamentals warrant and it doesn’t matter what we want these are the simple facts. Nothing has materially changed in the gold market, no news or light bulb moment has altered the structure of the market since the pessimism that was so pervasive a few weeks ago.

Like politicians many analysts tend to flip flop in their opinions simply because they have no underlying philosophy or set of rules. There is simply no structure to fall back on as the noise dominates their analysis rather than something more substantive.  

There is no doubt that at some point the bulls will be right and it may well be now but in our opinion this is too early to call, we would love to be able to publish more optimistic forecasts that would get the juices going but we can’t, probability says that we are still in a prolonged downtrend.

As a forecaster who uses logic and mathematics it would seem impossible to be able to spot a bottom and a significant multi-year change of trend when the price has barely moved by a few percentage points. All markets are filled with noise that seems to create randomness but if you tune out the noise and focus on the structure of the market you get a completely different picture.

 As well as price there is also time, barely two weeks ago the market was full of doom and foreboding, gold was oversold and heading for a big fall. Now today there is almost euphoria, whereas our analysis says that gold has merely become less oversold on a short term basis less bearish but not bullish. After a three year bear market any bottom will either be a capitulation our preferred outcome or it will turn like an oil tanker slow and methodical.

********

To view our unique multi-timeframe gold price forecasts visit us at: http://www.kenticehurst.com/forecasts

<