by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Gold continues in a trading range bound price pattern

22 Jun 2015 7:49 PM | Bill Downey (Administrator)

Gold Daily Report ~ June 23 2015

Trend

Long Term ~ Bearish- Need a monthly close above 1800 to confirm the bull market final phase underway. Need a monthly close above 1560 to neutralize the trend.

Medium Term ~ Bearish  Need a monthly close above 1255 and 1255 to remove bearish trend.

Intermediate Term ~ Bearish– Need close above 1222-1232 for higher TREND.

Short Term ~Neutral/Bearish – caught in a sideways market 1160-1225

Initial Resistance 1192-1198  2nd tier 1202-1209

Support 1172-1182 2nd tier 1158-1164

Our last update listed support at 1162-1172 and the low was 1182.  Resistance was listed at 1205-1212 and the high was 1201.

One the upside, until we take out 1225 and 1255 we remain in a trade range. 

Gold price drops below $1,200, focus on Greece

New York (Jun 22) Gold was weaker Monday on Greece optimism.  Positive talks over the weekend sparked a wave of rising optimism regarding the EU-Greece debt renegotiation. However, the Eurogroup meeting held this afternoon yield nothing but the usual wishes of an eventual favorable outcome.

The EU Leaders Summit is due later, and despite EU officials already argued against clinching a deal tonight, it seems the optimism of market participants remain intact, hurting the demand for the safe haven metal.

Gold short term significant levels

As of writing Gold is down to $1,185. A drop below $1,171.90 (low Jun.15) would open the door to $1,162.10 (low Jun.5). On the upside, the immediate resistance lines up at $1,209.00 (high May 25) followed by $1,215.30 (high May 22) and then $1,219.40 (high May 13).

On the medium term, a gold low at the end of June/early July could produce a rally attempt.  This would be in line with the medium term cycle due on June 23rd – July 1st (plus or minus 2 weeks).  The short term cycle is due July 1st (plus or minus 72 hours).  

Overall odds still favor one final low between Sept 2015 – June 2016. However, until we get a weekly close below 1162, a potential rally can develop in July/August first.

US Dollar Ready to Turn to Haven or Feed on FOMC Rate View

By John Kicklighter, Chief Currency Strategist

Fundamental Forecast for Dollar:Neutral

The FOMC’s own rate forecasts have projected 50 bps worth of hikes this year.

USDollar has enjoyed a positive correlation to FX VIX, but its haven appeal is not fully appreciated.

While there may be a lot of volatility for the Dollar moving forward, the medium-term fundamentals carry a positive slant whether general market conditions improve or deteriorate. If the US and global economies move to a more stable and productive state, there is little to throw the Fed off its hawkish bearing for monetary policy – a view that the market still seems to be discounting. If the clouds darken and the financial system starts to seize under the threat of a China-led speculative crush or a Greece-borne European crisis, the Dollar stands ready to accept haven flows. This is a unique position to be in and should keep traders focused.

If the ‘status quo’ of market complacency continues through the forthcoming weeks, the general FX focus is likely to shift back to the theme that has commanded the market for the past year – relative interest rate expectations. Considerable advantage has been conferred to the Greenback for the unique hawkish bearing of the Federal Reserve, but the premium of being a first-mover towards higher yields is not likely fully priced in.

In the short-term, the market is still pricing a significantly divergent view of the liftoff date for the first rate hike from what the central bank itself has projected. Further out, the pace of subsequent tightening (the curve) diverges even further. In the FOMC meeting this past week – which included updated forecasts and press conference – we found a few elements that spoke to the dovish. In particular, the fact that the vote to hold policy was unanimous suggests the most hawkish aren’t willing to start the ball rolling on the more difficult conversations at subsequent meetings.

Yet, a uniform wait-and-see vote doesn’t offset the clearly hawkish views laid out in the forecasts. In the interest rate projections, the Committee is projected two, 25 basis point rate hikes before the end of the year. That is a significant contrast to Fed Fund futures which show the market is pricing in the first move out in January 2016. Given that there are only four more meetings this year and the Fed is unlikely to move back-to-back, the first hike would likely come latest in September if their views hold. Beyond that first move, the curve maintains a hearty premium to the market’s own view through 2016 and 2017.

In the week ahead, the rate forecast will be messaged by the Fed’s favorite inflation gauge: the PCE deflator. It doesn’t need to present a dramatic reading, merely evidence that the slump in volatile components (energy and food) is rolling off.

Rate forecasts will be the natural theme that we return to so long as something more dramatic doesn’t present itself going forward. And really, only one theme has proven itself capable of overriding: risk trends. Risk appetite remains buoyant, but conviction is all but absent. A resolution to Greece and/or stimulus from China to halt the Shanghai’s plunge are possible. However, the true risk is deleveraging finally starting. In that open shift towards safety, the Dollar would surge. -JK

Bond Market

The long term green channel line from the 1981 peak is being tested again.  With a Fibonacci 34 years complete, odds favor interest rates are going to begin to rise.  The FED makes believe it controls long term rates but they really don’t.  This is why they have been playing a cat and mouse game with raising rates.  Once they see the long term trend change, they will raise rates in an effort to make the market believe it is their doing.  Should the 10 year close above 2.8%, look for a sharp rise to 3.5% where the last long term white line resides.  This is the real bubble today and when it goes, its not going to be pretty because the rise will not be due to economic confidence, but to a LOSS OF IT.  Once that happens, gold should begin its rise again within 6 months of the new trend.  But before it does, it will most likely have one final low.

10 Year T-Notes long term price chart 34 years

Gold Short Term

The US jobs report released on Friday was strong across the board and that most likely added to the gold pressure felt on Monday as participants keep going back and forth on whether a rate rise is in the cards for gold.

On Tuesday resistance is 1192-1198 and the 1202-1209 area and then 1218-1228 weekly.  Look for support in the 1172-1182 area on Tuesday and then 1158-1164.

A daily CLOSE BELOW 1162 will ADD A LOT OF WEIGHT OF BEARISH ACTION and the potential to move to new bear market lows in gold will increase substantially.  Until then we remain in a trade range.

If we can hold the 1177 area, it’s possible to bounce back to 1200 this week.  But overall, until we close above 1208, its best to favor lower, especially with the short term cycle pointing down to the end of the month.


 Gold since the 2015 high price chart


Cycles

The next cycle is due July 1st(plus or minus 72 hours).  If the next short term cycle underway now plays out, then we should move lower to month end.  Keep in mind during sideways markets like this, odds of a cycle inversion are always much greater.

We held 1162-1172 on a closing basis, and failed to make a new low and thus we remain trapped in a holding pattern of sideways action.  Any close below 1162 will favor lower prices.

It’s not hard to see a head and shoulder (bearish pattern) and if we lose the 1140 area gold will probably be heading towards 1050 and before it’s all said and done in 2015 it will most likely trade under 1000 (even if only for a bit).  In summary, everything remains sideways at the moment as it has for the last 13 weeks.

So far this week with the action on Monday, it looks like the red cycle is pointing lower to month end.

  Gold Cycles

HUI

Medium Term – Bearish

Medium Term Moving averages – 173.06 - 179.84

Intermediate Term Moving averages – 160-162

Wage talks between South African bullion producers and unions started on Monday, with both sides far apart, setting the stage for protracted wrangling in the ailing industry.

The talks, which involve AngloGold Ashanti, Sibanye Gold Harmony Gold and two smaller producers, come at a time when the sector is grappling with depressed prices, falling production and rising costs.

“We need to place the viability and sustainability of our industry and the jobs it provides at the centre of our discussions,” Harmony chief executive Graham Briggs said.

In labor’s corner stand four unions representing 94,000 miners. The two biggest, which are arch rivals, have submitted wage increase demands ranging from 80 percent to over 100 percent for the lowest-paid workers.

Solidarity, a smaller union representing high-skilled workers, said it was seeking a 12 percent raise for its members, for the retirement age of 60 to move to 63 and for companies to increase their contribution to medical insurance to 60 percent.

Investor jitters about the talks were underscored on Monday as Johannesburg’s Gold Mining Index dropped almost 5 percent. Bullion’s spot price also fell, slipping back below $1,200 an ounce, a critical level seen key to maintaining the profits of many marginal mines.

In a departure from past practice, the talks are beginning with neutral chairpersons who will act as facilitators.

Another departure is an industry proposal to offer labor an “economic and social compact” or a welfare package which it says is needed to keep the shafts profitable while providing for the welfare of miners.

The Chamber of Mines said last week this would include proposals to share the gains of a rising gold price with workers while also sharing the pain of price declines. Proposals on housing, retirement benefits and employee debt will be included.

But union leaders have publicly poured water on the initiative, saying they only want to talk money.

The first round of talks will be held until Wednesday and will see the different parties presenting their positions. Three more days have been scheduled for next week.

David Sipunzi, newly elected head of the National Union of Mineworkers, the biggest gold union representing over 50 percent of the sector’s miners, defended demands for wage hikes of 80 percent on Sunday, saying miners were still being paid “apartheid wages.”

Labor militancy has been on the rise, spurred by perceptions that, two decades after apartheid’s demise, wages remain too low.

But South Africa’s gold industry is in trouble. According to the Chamber of Mines, costs between 2008 and 2014 rose on average by over 20 percent per year. Production over the past decade has declined by almost 8 percent annually.

Price Chart

HUI price remains BEARISH below the medium term moving averages (173-179) and the intermediate averages at 160-162. That is where current resistance resides on the upside.  On the downside as long as we are below the white channel line in the 160-162 area we can move lower to the other support line at around 140 and it’s the last real support before new lows that would extend back 10 years.

The bottom line analysis at the moment is gold stocks are bearish on all time frames at the moment.  We need to see action back over the moving averages in an impulsive manner to change the outlook.  Gold stocks usually bottom during July/August and rally from mid August to mid October.  But that’s during a bull leg.  Still, we should see some type of action of that manner once a low is established. 

  HUI gold stock index price chart

Gold Medium Term

Long Term Trend ~ Bearish since Oct 2013 @ 1361

Long term Moving averages 1350 – 1429

Medium Term Trend ~bearish – Moving Averages 1201.65 – 1209.22

However June is a pivotal month and we often see important price lows.  Just look at the last three years.  IF gold breaks lower here, odds would favor we’re heading towards 1050-1100.  However, a weekly close above 1225 and then 1255 would begin to favor a rally into July/August (which in itself is often a bearish move).  

If there is one PLACE to look for the BULL/BEAR line it’s this 1172-1192 area.  As long as price remains above that level, then an upside move can still take place.  Any weekly close below 1158-1163 favors lower. On the upside we need a weekly close above 1225 and then 1255 to get some action to the upside going. 

We stated during the rally from November to January that the bull market in gold can ONLY resume if we take out the dual triple green channel lines and make it support. Price reached the middle line at the triple green trend line and then turned back down and has not looked back since. And that’s really the bottom line. In order for the gold market to resume its bullish form gold absolutely must make the triple green channel line a price support point and not resistance.  

The one thing to note here is the medium term moving averages are at 1201-1209 and that is the area price resides in as we enter the final week of June. 

 Gold weekly price chart

GOLD ETF GLD

Moving Average Trend ~ 113.64– 113.65 – Neutral

GLD (like gold) is a trading nightmare at the moment of sideways erratic movement.   Until things give trending indication, its best to be patient.  

Resistance is 119-120 and support at 111-112 and that’s the range we keep trading in.  There is another line near 109.   Longer term support not seen on the chart below is 98-105 and near the 84 area.

 Gold ETF GLD price chart

GDX

Intermediate term Trend   19.03 – 19.18 ~ Bearish

Resistance is at 20.08 – 20.22

GDX is stuck in a long trading range between 17 and 23.

Whenever that occurs for this length of time, its best to take the moving averages with a grain of salt.

A retest of the green line---which is basically the 2008 crash low line can’t be eliminated.

 GDX gold stock ETF price chart

What next?

It looks like the short term bearish red cycle is in play with Monday’s drawdown.  The cycle is not due to bottom until month end.  Its possible that if 1177 holds on Tuesday we could get a bounce back to 1200 as gold retains its choppy pattern.

Indeed, its “Chop around the clock” as we remain in massive congestion. 

Bottom Line

June often is a turning point but it can extend into July.  As long as we remain above 1162, there is still a potential for gold to mount a rally.

While odds continue to favor this range to end, it has become a wait game.



Technical Analysis :: Gold & Silver

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