Gold Price Forecast: Bull And Bear Market Scenarios

We expected $1170 to get broken this month…and indeed it has. This is more than likely bad news for the bulls and, even though price firmed slightly above at the close of the week, it is still an ominous sign.  Our expectation is that June is set to be a bad month for the bulls - the next levels to watch for are $1143 the low for 2015, followed by $1132 the current low for this multi-year consolidation.

Our assertion for the last few months has been that we have been in a multi-month bear market consolidation with lower lows yet to come. This week’s gold price action makes that potential outcome far more likely, in our opinion.

SPDR Gold Trust (GLD) saw a drop in its inventory last week by some 7 tonnes. Western investors continued to be sellers, as they have been for a couple of years now.

The Commitment of Traders Report, which covers trades up to the close of Tuesday (so before the significant price drop), saw the specs and the commercial traders essentially tread water. We won’t see the positioning of these two groups post support break until this Friday. 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 ratio between 2yr and 10yr treasury notes remained virtually unchanged last week. Yields for both the 2 and 10 year pushed higher last week but remain subdued in relation to 2011. It is our opinion that many traders are front running the Fed’s proposed rate hike. It is worth noting that yields have been exceptionally low and were due a rebound. Headlines of a global bond rout are somewhat premature in our opinion and yields still remain in a long term bear market.

So we have a number of scenarios in mind for the gold price over the next few months. Our longer term fractal forecasts have been eyeing up a summer low and this week’s action has begun to make that look like a real possibility.

Our first potential bottoming pattern would be a simple double bottom at $1130 - it is a possibility, but we think the pattern built up over the last few months has the potential energy to make a more substantial low.

Our second scenario would involve a steep decline to around the $1000 area, creating a severely oversold condition and providing the potential energy for a snap back rally and the emergence of a new bull.

Our third scenario is a slow long grind downwards all summer. This would leave the longer term gold bull in doubt, pushing price to lower levels but not creating the extreme undervaluation that is associated with a capitulation low. This is our least favoured outcome as we still believe that, in spite of the slow grind of the last few years, gold is still fundamentally in a long term bull market and we are near the end of a long term multiyear bull market consolidation.

We introduced our new, more sophisticated fractal forecast in December of 2014. Since then we have constantly tracked and forecast gold with our unique forecast range. With the exception of a few weeks in May, our forecast range has been pretty much spot on. We are proud of our record and hope you follow us as we try and logically navigate the next few months.

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To view one of the most accurate and unique gold price forecasts available visit us at: http://www.kenticehurst.com/forecasts