Gold Price Forecast: Negatives Still Weighing On Gold

Gold continued to react to the heavy resistance it hit previously - this should be a worry for the bulls. We expected May to be a bad month but it ended with a small gain, a higher high and higher low for the monthly candle. We have been urging the bulls to be cautious for the last few months and we still think the low at $1170 is important and is likely to be broken this month.

We continue to see more strength than we expected and, as we pointed out above, the month of May saw the bulls gain a small amount of traction. However, we see no evidence at this stage to change our interpretation of the last few months’ activity as a bear market consolidation with lower lows to come. We do, however, remain vigilant.

There are a few other measures for gold that we keep an eye on. Although they play no part in our forecast algorithm, they are certainly worth keeping a broad eye on as we go through the next few months. Firstly, the SPDR Gold Trust (GLD) saw a small uptick in its inventory, but western investors certainly didn’t rush to buy gold in large quantities at these levels last week, and the slow slide we have been witnessing for the last few years continues.

The Commitment of Traders’ Report saw the speculators start to reduce their net long exposure to gold, whilst the commercials have started to reduce their net short exposure. This is in line with our expectations for lower prices as the specs dilute their holdings. We would expect the two main parties to reduce their net exposures more towards neutral before a new up leg can begin.

The yield spread between 2yr and 10yr treasury notes remained virtually unchanged last week after hitting resistance a week or so ago.  At this stage we see a new down trend in development, and the danger is that we are dropping towards levels not seen since the start of the crash and the beginning of central bank stimulus. This is not likely to be gold positive.  

At present we remain firmly in the bear camp for Gold on a short term basis. It could well be that we have already made the final low and we are basing for a new bull run, but as far as we are concerned there is little evidence to support this position.

Stay tuned as we try to navigate through stormy waters over the next few fascinating months using logic and probability to stay on the right side of sentiment. We believe patience will be rewarded and in the years ahead many investors will wish they had been paying attention to gold at this time.

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Ken Ticehurst

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