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Gold Forecaster – Weekly #585: Gold knocked down to the lowest level of support!

Dear Gold Forecaster Subscriber,

Weekly Gold Review

The gold price broke down through the “golden cross” [where the 50-day average rises through the 200-day average] and fell to just above $1,200 level. As you can see below in the Forecast section the gold price is at the lowest level of support now.

The “flash Crash we saw when ‘paper gold’ to the extent of 56 tonnes of gold did trigger most stop loss ‘stops’ buys below $1,250 as the price recovered. Since then the decline in the gold price has been steady but persistent.  We have seen substantial repeated sales of gold from the SPDR gold ETF in the last two weeks, which is needed for the gold price to fall. The work needed to climb back above that level appears to be substantial.

In favor of the gold price, should the traditional relationship of ‘a falling dollar means a rising gold price’ in the future we expect the gold price to rise or be steady in the face of a potential ‘bear’ market for the dollar. But the last week has seen that relationship break down as the dollar weakened alongside the gold price..

While we have seen a lifting of the Fed Funds rate by 0.25% the U.S. the fall in the gold price was attributed too the Fed Minutes that indicated the disappointment that the inflation rate is not rising. We find that difficult to believe as that information was already discounted.

What is clear is that the buying of physical gold was replaced by the selling of physical gold in a speculative manner designed to push the gold price down. This is so because at each key level, selling came in. Because the physical gold market was so close to a balanced position between buyers and sellers, it did not take a great deal of gold sales to take the price down.

Two weeks ago saw the big 12 tonne sale of gold from the SPDR gold ETF just after the Fed’s statement and in the last week we have seen three sales of over 5 tonnes. It was this selling that finds the week’s end gold price at $1,212.40.

Does this precede a major tumble in the gold price? To answer that we need to reflect on the time it has already spent above $1,200 this year. The demand is there at $1,200.

We add to that the fall in the dollar this year. We called the top of the dollar as you know. We now confirm our view that it the dollar index falls below 95.4 the dollar will have confirmed it has entered into a ‘bear’ market. Once this is recognized we see gold rising again.

As to this period until the end of August being the traditionally the “Doldrums” for Indian demand we expect this to last for two more months, but then come back in force after a most successful harvest.

We also expect the final quarter of the year to see heavy Chinese demand ahead of their New Year.

Bearing in mind, that it was in July 2011 that the gold price reached its peak of $1,921, after the 2008 financial crisis sent it there. If the dollar does enter a bear market there is no reason to think we could not see such a reversal in the gold price.

Please open the attached PDF* for our full issue of The Gold Forecaster,
Julian Phillips and Peter Spina

https://www.goldforecaster.com/wp-content/uploads/2017/06/GF585.pdf

Download Issue #585

Gold Forecaster – Weekly #584: Gold put on the back foot by the Fed over the last week gold recovered now rising above support!

Dear Gold Forecaster Subscriber,

Weekly Gold Review

The gold price is still holding above the “golden cross” [where the 50-day average rises through the 200-day average] and the pressure is now lifting. While it is still consolidating it has risen in the last two days of last week.

The focus of last fortnight was the long-awaited lifting of the Fed Funds rate by 0.25%. The statement that accompanied it was positive on the U.S. economy, but not so positive on wages and inflation.  In view of the weakening inflation and wage figures a consensus is building that the Fed was too hawkish in view of the data. Of course opinions are irrelevant, it is the action the market takes that counts. The condition for more tightening given by Janet Yellen that ‘the U.S. economy should continue to moderately grow, and continue broadening that growth throughout the economy’ needs to be fulfilled first. The data, so far, in the last couple of weeks is not pointing that way. It may well do so but we need to see that first before we can conclude that it is. We are not convinced.

The Fed did indicate that if moderate widening recovery continues, the Fed will very slowly reduce its balance sheet at year’s end, simply by not reinvesting maturing Treasury income. The process will be very, very slow, when it does start.

This was enough to strengthen the dollar a little, which, together with a huge 12 tonne sale of gold from the SPDR gold ETF just after the statement was enough to pull the gold price to $1,252.90 at the end of the week before last.

That week was slightly disappointing for gold but then showed positive signs of recovery towards the end of last week when the gold price closed above $1,256. This was only a $4 change. We must be careful not to read too much into such small moves.

This was on the news that the oil price had fallen into a bear market. To keep our perspective, the move of the oil price into a bear market is far more important than the Fed statement as oil has a far more significant impact on the global economy then a small cautious Fed rate hike.

The gold price remains at a very important junction for gold as the short, medium and long term pictures for gold have converged at the present $1,240 to $1,320 area.  If the gold price hits $1.300+ then the upside target of $1,409 is on the horizon.

To clarify, we are in the price around $1,250 that will decide the gold price’s direction for the next few years. As each day passes and the price holds around $1,250 the greater the subsequent rise or fall will be. We believe that it will rise. That means that the downside risk technically is considerably smaller then the upside opportunity.

We believe that we have seen the end of the down period that began in 2013!

Please open the attached PDF* for our full issue of The Gold Forecaster,
Julian Phillips and Peter Spina

https://www.goldforecaster.com/wp-content/uploads/2017/06/GF584.pdf

Download Issue #584