Gold Price - Where is it heading?

Uncle Festivus said:

For the benefit of the rest of us Jeanie Littles/slow learners, what will the $US, the US dollar index & the gold price do in the next few months?

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Working on it.

I have had a couple of conceptual breakthroughs (for me), despite having a range of pressing distractions right now (hence the greatly reduced posting of forecasts), but have been looking at the US dollar equation, coupled with a range of commodities (like gold and the full range of LME futures), and of course the major indices and US bond market.

I know there is a correlation between all of these markets. I know that there is a correlation in daily and weekly time frames (and of course any other time frame including monthly charts).

For me to make a first class forecast now would be premature while I work this out, and incorporate my new concepts into the mix, let alone bounce some ideas off wavepicker and vice versa.

Overall I tend to agree with his perspectives, but have some timing issues to resolve and some interrelationships between various markets to reconcile.

I do have concerns about the state of the China market which is looking very much like a classic bubble (of the “South Sea” and “Tulip” variety).

I think there is a relationship between all these markets to a varying degree which may affect the way gold trends.

I’ll put up some longer term charts to illustrate what I’m struggling with to come to a precise conclusion. Until I can see this clearly, I’m reluctant to make an outright call with a time and price (maybe I’ll make a time only call). I’m waiting on some of the futures data to come in, then I’ll be able to post up some related up to date charts…



Mag

Thanks Mag, I agree with your sentiments, esp China. Maybe we are walking beside each other here, in these turbulent times. (Daaaarling )

Magdoran said:

I do have concerns about the state of the China market which is looking very much like a classic bubble (of the “South Sea” and “Tulip” variety).

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Are you able to do a basic wave count of it? Because last time I looked it looked like a massive W5 type formation

chops_a_must said:

Are you able to do a basic wave count of it? Because last time I looked it looked like a massive W5 type formation

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Hello Chops,


There are times to rely totally on EW, and times not to, and times to use it as part of the equation. By the way, wavepicker is the stronger practitioner in EW than I am, hence his view would be relevant.

On this occasion I am still weighing up exactly what to use for an effective measure. I am still studying bubble style patterns in order to improve my estimations. But again, this is premature, and I need more time than I have available to do it to my satisfaction.

Does the Shanghai market look like a 5 wave of some sort out of a contracting wave 4? Absolutely!

But can a 5th wave subdivide and extend (especially in a bubble)? Oh yes, they can, and just like the problems measuring the recent XAO wave structure, the same applies for the market in China. Working out tops at the best of times is fraught with difficulties, let alone bubble tops which are notoriously hard to work out precisely ahead of time. (It can be done - Gann for instance published the exact date of the 1929 top about a year out from the event).

Unfortunately the data that I have for the Chinese market is really patchy, and I can’t get good quality information back very far which makes it quite challenging to analyse this market effectively with time cycles and geometric technical analysis.

I just had a look at the current chart and the trend still seems to be up, and I suspect that it will remain bullish into 22 August or the alternative 26 August. What it does around here will tell me more about the trend. I can see this moving up into 21 October or beyond (it may extend) at least currently, but the price action over the next week will tell me more about what is going on.

Using pure EW you’d expect this was a blow off wave 5 out of a contracting triangle 4, but I suspect that even though it may pull back from some kind of top around 22 August that it will extend bullishly from this pattern at least into October and beyond (I have 2 different cycles to contend with, and cannot work out the dominant one from the present data until it plays out some more).



Regards


Magdoran

P.S. By the way, that futures data has just come in, so I’m examining it and should be able to look at Gold, US dollar, and related markets in due course.

Gold I think has a combination of it’s own unique cycle, correlation with currencies (notably the US dollar is a factor), but the US dollar and equity markets in turn have an interrelationship with the US Bond market, hence I think this is a vital piece of the puzzle.

Look at the US T bond chart, and see how it is right in the balance right now. It looks to me like the secular trend is DOWN in the longer term meaning that interest rates are trending UP (remember interest rates are the inverse of the price of the bond). However, the current situation is less clear.

In the daily (see attached chart) bonds could go either way from here, it’s really in the balance. If the 06 August high can be exceeded, this may move bullishly from here, but my suspicion is for a failure to close the recent gap, and some kind of bearish movement to eventuate. I will know a lot more when bonds trade into 24 August and immediately after this date, but more importantly into 11 September and 17 September (note the marked dates on the chart).

Till I know what this is doing, the effect on equity markets, US dollar and for this thread Gold is really in the balance, since I think interest rates are a key factor in the mix right now.

Us dollar and gold charts to follow…


Mag

Uncle Festivus said:

For the benefit of the rest of us Jeanie Littles/slow learners, what will the $US, the US dollar index & the gold price do in the next few months?

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Hello Uncle, If you read the posts in this thread going back to the last 18 months you will probably find some possible answers to that question. In short however, IMO the US Dollar Index will continue to trend down in the short term, perhaps even till years end. But next year might be a completely different ball game. Since the USD Index is comprised of a basket of major pairs traded with varying weightings(the highest component of which is EURUSD), it might pay to even look at the EURUSD which should be close chaging trend by the end of the year. This opinion is purely based on pattern analysis and I have not done any Cycle or Time analysis on the USD Index. The same goes for the AUDUSD, but in terms of time it might hang in there 6 months longer however compared to the EURUSD.

As for Gold, more of the same, caught in a range with the medium term trend downward( refer to all my and Mags post re Gold on this thread)

Cheers

Please see attached Gold chart – with a lot of the workings still left in…

This just looks like its going sideways in the daily for a while. Until it trades into the time points given (there is another couple of cycles evident and I again don’t yet know which one is dominant – or if they are concurrent cycles) I can’t see any good directional trades out of this pattern. The cycles are working, but the pattern is ambiguous in terms of direction.

Note the recent double top below the April high. This level really needs to be breeched for Gold to move forward, and layered on with lows coming in above this level. Otherwise this really looks like it’s going to go sideways or move down from here.

This looks like market indecision and some kind of consolidation.

I tend to agree with the concept Gold is in a secular bull phase in the long term, and agree with wavepicker that this could move down at some stage to wash out the sellers before resuming a strong bull trend. Timeframe is difficult currently till this plays out some more, but wavepicker’s suggestion of an 8.5 year cycle is plausible.

I’m still studying the longer term patterns and have yet to reach a conclusion in this time frame for precision dates and levels, however, here is my current thinking –

Two key dates: 20 October 2007, 30 August 2008. These are weekly dates, hence they can be out 1 week either side of a 1 week period, so they aren’t that accurate (yet – working on this). A pull back into the October week should find support.

The weekly and monthly charts still look bullish to me, but the pattern indicates that some kind of shorter term pull back would be normal before a drive up to test the major highs. There is definitely a strong cycle running through gold, and the more I can see into this and how the interrelationships can be mapped effectively, the better I’ll be able to comment on this subject, but this is a work in progress.

Mag

P.S. Alternative Daily time increments: 31 Aug, 12 Sept (18 Sept??).

Interesting example of a panic contagion in the XGD (down over 200) while the Aus gold price is up over $800 again.

US Dollar – the chart tells the story. Tend to agree with wavepicker’s assessment.

Magdoran said:

US Dollar – the chart tells the story. Tend to agree with wavepicker’s assessment.

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So the $US will rebound against the major currencies?

The US$ and Gold - Deflation or Inflation

A couple of dates to remember
18th September
30th 31st October
11th December
The Fed meetings for this year
(Watch bond and US$ and POG movements a couple of weeks prior to meetings)

Bond prices and interest rates are frequently related to gold stock movements with a lag of 6 to 9 months. As gold stocks rise, interest rates will bottom (and bond prices will top) approximately 6-9 months later.

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The next is a couple of questions and answers on Financialsence

This is Ron from Virginia, the question of whether we're about to enter a period of hyperinflation or deflation is a critical question. And since it looks like the current period is one where credit is the culprit where the big inflation is still occurring, rather than the paper-money sphere, it seems it more closely resembles the 1920s credit boom rather than the current Zimbabwe paper-money blizzard. You weighed in on the hyperinflation-before-deflation side. Do you assume that the government is going to monetize all of these debts? Thanks.

JIM: Absolutely, Ron. One of the ways you get rid of the huge debt burden is to inflate it away and I’ll give you an example: Monetize. The Fed began this week with injections buying mortgage-backed securities that were illiquid or couldn't be sold, so you get a good example of that this week.

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Hello, Jim and John, this is Frank from New Jersey calling again. Thank you for the great work as usual. I do have one question that I don’t know has ever been brought up. What if the Fed decides not to cut rates. You know, your forecast is predicting that they will cut rates because otherwise…to save the economy and sacrifice the dollar. What if the opposite turns out to be true; or if they would just do nothing? How would that affect the investment strategy of gold and commodities in general because my guess is there would be less demand for it? Just wanted to know your insights on another scenario.
Frank, if the Fed didn’t cut interest rates and we went into a depression there would no longer be a Federal Reserve. You would have politicians all over their case as conditions in the country worsened; as conditions in the market worsened. Believe me, they’re going to cut interest rates. But the one thing that they have to be very careful of is they can’t look like they are panicking, because when the Fed looks like it’s beginning to panic then psychologically you could have the markets move against them – in other words, you could see gold move to 1000 over night. And in terms of if the Fed did not cut interest rates, and let’s say we went into a huge deflation cycle with the economy going into a depression, and they refused to cut interest rates during that period of time, I just don’t think you have to worry about that. The present chairman of the Federal Reserve did his doctoral thesis on the Great Depression; and his thesis is that the reason that the Depression occurred is that the government or the Fed itself did not print enough money, soon enough, and in large enough quantities to avoid the Depression. So that’s his view, and it was further backed up at Milton Friedman’s 80th birthday where he said, “Friedman, you’re right, we’ve learned our lessons and we’ll never let that happen again.” So I don’t think, Frank, you have to worry about the Fed not cutting interest rates.

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Uncle Festivus said:

So the $US will rebound against the major currencies?

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USD EURO:

It’s too early for me to give a definitive answer. I need more time to study this market, and I’m really just doing this off the cuff in-between a range of other activities. I have spent time building my Forex “stable”, and researching previous periods, but this needs more work to make precise forecasts like I do in other areas.

However, if that is an ending diagonal in the weekly playing out, EDs typically entail a sharp move against the trend. When this might happen is not clear to me yet, but in the weekly possibly not too many bars ahead, difficult to say since I’m better at forecasting with daily charts.

Alternatively the weekly chart could also be showing a nesting pattern which means a capitulation may be required to end the trend – essentially a panic move down. That’s also possible with this type of pattern, and the methods to differentiate the two while in existence is still in its embryonic stage.

This is exactly what wavepicker is seeing too…

Frankly, I can’t tell which it is at this point, but the way the currency trades into the key dates will give some clues on probabilities (if I’ve got the cycle right, which in this case is still preliminary – you’re seeing me do the groundwork while I muse through trying to verify which cycle is dominant in which time frame, and there do seem to be cycles evident to me).

Key elements I’m looking at are - what is the current trend in different time frames – the answer is down in the daily, and down in the weekly.

The pattern in the weekly is a struggling trend, although started off strongly. See how strong the move was from 2000 to early 2005. This was a huge move down, wasn’t it? Then look at the recent pattern over the last couple of years. It hasn’t moved much in terms of the range of movement, has it? It has crept down weakly, after a major low came in around December 2004. That’s why this could see a counter trend of some sort come in.

Hence I’m waiting to see something convincing before making a projection at this point. I maintain the US bond market may give a clue for gold, US dollar and the major indexes.


Mag

Sorry Gold bugs.

I am backing up Magdoran and Wavepicker on this.

Attached chart in the us$ index weekly. I personally think the brear market has finished and its moving sidways now.

I see a early pattern of possible accumulation starting to occur there are some other happenings in other markets that eg bonds that back up the pattern. Rates rising = cash valuation, correct me if i am wrong on that.

I see the US Dollar Treasury notes, as a possible near term opportunity on the long side.

Good trading.

see chart

Trade_It said:

Sorry Gold bugs.

I am backing up Magdoran and Wavepicker on this.

Attached chart in the us$ index weekly. I personally think the brear market has finished and its moving sidways now.

I see a early pattern of possible accumulation starting to occur there are some other happenings in other markets that eg bonds that back up the pattern. Rates rising = cash valuation, correct me if i am wrong on that.

I see the US Dollar Treasury notes, as a possible near term opportunity on the long side.

Good trading.

see chart

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Hi Trade It,

that is what it maybe starting to looklike, I suppose then the rest maybe just a question of timing. Precious metals and foreign currencies look to be doing it tough again tonight.

Cheers

wavepicker said:

Hi Trade It,

that is what it maybe starting to looklike, I suppose then the rest maybe just a question of timing. Precious metals and foreign currencies look to be doing it tough again tonight.

Cheers

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Are they what WP!

Feels like yesterday I was long on the AUD/USD at .88 cents!



*Bear markets nor bull markets can never last forever but hope and expectation can last as long as u choose to see it!*

In A$ from the ASX GOLD stock, the price has formed a nice cup or bowl. Will there be a handle and then a run up?

GP

bean said:

I was going to sit back and see how gold traded the next couple of days before posting.
Because I do see a few possiblities for the US Gold Indicies
I thought it would continue in a very very tight range till next week.
Support 140 & 335 for the hui and xau
However I now think that they are going to make a move tonight and tomorrow night.
The direction????
I think down but not 100% sure (only about 60%)
The POG will follow

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Well 1/2 right???
The US Gold indicies have drop 8% last two day
POG less than US$ 2

bean said:

Well 1/2 right???

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Or, half wrong. Maybe a coin toss could do the trick next time?

Don't worry, I'm sure, in my waters, that gold will continue to move sideways, roughly that is. The Greenback will continue its recovery, albeit more gradually than the last few weeks, so, if you'r sitting in Australasia, UK or Europe, no troubles. If you've been in US Bonds for two weeks, great news, and more to come, hopefully. (reasoning for comments, see post 1621)

A bounce tonight, if not run for the hills.
The Gold price will follow the US Gold Indicies

Could I get my low in POG very soon.

US$ a bit more of a rise till interest rate cut (which may be soon.