The Gold Market Review

Market Update

During the last three weeks gold broke out to the upside and posted a sharp rally until $1,303 missing the January 2015 high only marginally. Since then prices have come back down to $1,257 retracing all of the previous gains. Overall the bulls remain in control and gold could still rally towards $1,333 - 1,355 before the first wave up is finally finished. In a new bull market gold will stay overbought much longer than anyone can imagine. But sooner or later the laws of gravitation and regression will force the corrective second wave down. Since gold is acting strong but making no progress overall since February it is very likely that we won't see prices below $1,180 anymore. In fact I see $1,180 - $1,215 as the zone where a pullback/dip should already end. This means the important 200MA ($1,156) will need quite some more time before it can act as massive support in this zone.

The gold- and silver-miners had a spectacular start into 2016. Some of them exploded more than 300% and 400% after being beaten down for nearly five years. Although it might be tempting to chase this sector the reality will bring us a pullback sooner or later. This dip will offer a great opportunity cause this sector has a long way to go up. I will present the first mining recommendation today and plan to add more during the next couple of months.

The Midas Touch Gold Model neutral since May 9th

My Gold Model quickly jumped to a Buy Signal on April, 28th. Yet two weeks later it flipped back to a Neutral Signal.

Compared to my last public report we have two new bullish signals:
SPDR Gold Trust Holdings
Gold in $, €, £, ¥

Six new bearish signals are coming from:
Gold in USD - Daily Chart
Gold Seasonality May
Gold in Indian Rupee
Gold in Chinese Yuan
GDX Goldminers - Daily Chart
US-Dollar - Daily Chart

My model is neutral again. It will probably need a push above $1,295 in gold to get back into full Bull Model.

Gold not convincing but still strong

While the general markets are ruled by uncertainty these days gold leaves a somewhat mixed impression. On the one hand prices managed to climb all the way up to $1,303 missing the January 2015 high only marginally. The following pullback towards $1,257 has met immediate demand and the ETF investors have added more than 47 tones of gold during the last two weeks to their vaults. This high physical demand in combination with the newly established Chinese gold-fixing has likely prevented any larger pullback. Actually since February we have not witnessed any of these waterfall sell offs in the gold market anymore. The only thing missing is a higher high above $1,307 to confirm that gold indeed is in a new bull-market. Personally I believe we are already on the way towards $1,500 but should get at least one or two larger pullbacks before gold is hitting this big horizontal resistance.

The bears might argue that Gold is basically still sitting at its February high around $1,262 and did not make any progress over the last three months. Looking at the extreme negative CoT-numbers and the ETF demand one can only wonder how much "new" speculative money is on board of the gold train now. It´s still a small market and once everybody wants or needs to get out you will get this waterfall sell off again. But so far the CME Group has not raised the margin levels for gold futures and neither has the unfavorable seasonal cycle stopped the bulls.
Looking at the chart another run towards $1,300 is confirmed if gold can push above $1,280/1,285. This could happen within the next couple of days or after another brief intraday test of the 50MA ($1,249). A breakout above $1,285 would turn the current consolidation into a bull flag. In that case the odds for powerful rally towards $1,333 - $1,355 do increase dramatically. In fact this target zone should then be met rather soon and fast, marking the end of the first wave up from $1,046. It should be followed by a larger pullback towards $1,180 - $1,215. As long as gold can hold above $1,262 on a daily and especially on a weekly basis this bullish scenario has an increased probability. Note that if gold disregards the seasonal cycle now we might get a weaker 3rd quarter as a surprise.

The bears need to push prices below the last low at $1,257 to get anything going. And even then all they will meet is one strong support after the other. The path of least resistance remains to the upside for now.

Action to take: Wait until you can buy the VelocityShares 3xLong ETN (UGLD) below $10.50

Stop Loss: $8.50

Profit Target: $18.25

Timeframe: 8-10 months

Risk ($1.50) / Reward ($7.75) = 1 : 5,1 (very good ratio)

Position Sizing: Don´t risk more than 1% of your equity

Investors should buy physical gold with both hands if prices move below $1,185 again. As well buy silver below $16,00. Buy both metals until you have at least 10% of your net-worth in physical gold and silver. But do not over expose yourself neither. 25% of your net worth should be the absolute maximum. If you want to be more aggressive put 2/3 into silver and 1/3 into gold.

1. Portfolio & Watchlist

Long-term personal believes (my bias)

Officially Gold is still in a bear market but the big picture has massively improved and the lows are very likely in. If Gold can take out $1,307 we finally have a new series of higher highs. If this bear is over a new bull-market should push Gold towards $1,500 within 1-3 years.

My long-term price target for the DowJones/Gold-Ratio remains around 1:1.
 
and 10:1 for the Gold/Silver-Ratio. A possible long-term price target for Gold remains around US$5,000 to US$8,900 per ounce within the next 5-8 years (depending on how much money will be printed..).
 


Fundamentally, as soon as the current bear market is over, Gold should start the final 3rd phase of this long-term secular bull market. 1st stage saw the miners closing their hedge books, the 2nd stage continuously presented us news about institutions and central banks buying or repatriating gold. The coming 3rd and finally parabolic stage will end in the distribution to small inexperienced new traders & investors who will be subject to blind greed and frenzied panic.

Bitcoin could become the "new money" for the digital 21st century. It is free market money but surely politicians and central bankers will thrive to regulate it soon.

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© Florian Grummes 2016 all rights reserved

Hohenzollerstrasse 36, 80802 Munich, Germany

Disclaimer & Limitation of Liability

The above represents the opinion and analysis of Mr Florian Grummes, based on data available to him, at the time of writing. Mr. Grummes's opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Grummes is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in the Midas Touch. As trading and investing in any financial markets may involve serious risk of loss, Mr. Grummes recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Florian Grummes is not a Registered Securities Advisor. Therefore Mr. Grummes's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. The passing on and reproduction of this report is only legal with a written permission of the author. This report is free of charge. You can sign up here: http://eepurl.com/pOKDb

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Mitarbeiter und Redakteure des Midas Touch Gold Newsletter halten folgende in dieser Ausgabe besprochenen Wertpapiere: physisches Gold und Silber, Bitcoins sowie Gold-Terminkontrakte.

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Herausgeber und verantwortlich im Sinne des Presserechts / inhaltlich Verantwortlicher gemäß §6 MDStV 

Florian Grummes 

Hohenzollernstrasse 36 

80801 München

Germany

E-Mail: [email protected] 

Website: www.goldnewsletter.de