Gold Price Forecast: Interesting Month End Ahead

The price of gold hit heavy resistance as forecast last week and the reaction should be a worry for the bulls. As we enter the last few days of the month, we believe extreme caution is warranted. Our forecast has been indicating that May should be a bad month for the bulls. Currently, we have a higher high and a higher low for the monthly candle.  The low at $1170 is the one to watch out for.

We thought we would expand our essay this week to include a few other measures for gold that we keep an eye on although they pay no part in our forecast algorithm. Firstly the SPDR Gold Trust (GLD) has seen a constant drawdown since the start of 2013 and the last few weeks have been no different. When Western investors are bullish on Gold they turn to the GLD to add to their exposure currently they are doing the opposite.

The COT report which is published every Friday and shows the positioning of various gold market participants up to the previous Tuesday has seen the speculators hedge funds continue to increase their net long exposure to gold whilst the commercials have been selling. Whilst just being a contrarian for the sake of it is not a great strategy the high net exposure of the Hedge Funds should worry the bulls.

The yield spread between 2-year and 10-year Treasury Notes dropped again after rallying since February this year. This is the difference in yield between shorter and longer dated Treasury notes and gives an indication of how investors view inflation expectations over the longer term; at present last week’s sharp drop indicates they don’t see inflation as a threat. Moreover the spread is currently at lowly levels compared to the heady days of 2011 and more significantly is in danger of dropping towards levels not seen since the start of the crash and the beginning of central bank stimulus.  

At present we remain firmly in the bear camp for the gold price.  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.

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