by Bill Downey     Price Analysis of Gold and Silver
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Bill Downey, of Gold Trends.net, LLC, is an Independent Investment Analyst with over twenty years of study. YOU SHOULD NOT TAKE ANY MATERIAL posted on this WEBSITE AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. Do your own due diligence. No one knows tomorrow's price or circumstance. The author intends to portray his thoughts and ideas on the subject which may s be used as a tool for the reader. GoldTrends does not accept responsibility for being incorrect in its speculations on market trend or key turning points that it may discuss since they are at best a calculated analysis based on historical price observations.

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  • 19 Jan 2016 12:31 PM | Bill Downey (Administrator)

    Gold Short Term

    On a short term basis gold is trying to form an uptrend channel from the November lows.  From a pattern perspective, it is choppy and overlapping from lows to highs.  That in-itself suggests (so far at least) that it is a counter trend rally.  In other words, the main medium term trend is still down overall. The pullback from the highs retraced a Fibonacci 61% almost to exactness, and then pushed back to 1100 before this latest pullback where it now brings us to the 1085 level.  On this short term basis, price needs to hold at or near that 1072 level in order to maintain the current upswing.  A close below 1065 and then 1055 would warn that gold is once again weakening and will open up the potential for gold to move to new lows under 1040. Support is the 1070-1080 area and resistance is 1097-1107.  It takes a close above 1114 to favor higher prices into February.  A close below 1065 would put a bearish short term damper on gold.  (Subscribers to gold trends went long gold at 1072 (just one dollar above the low established on the pullback for a short term trade). Lets now go look at the short term cycles.


    Gold Cycles

    The next short term cycle turn is Jan 23rd (plus or minus 72 hours).  That means that the gold window for an upturn begins tomorrow but could be as late as next week.  We discussed on the website updates that gold was expected to pullback this week from that push we got from 1072 to 1100.  That pullback is taking place and now its a matter of when gold makes this next short term low on the blue cycle.  These cycles work about 70% of the time at the turns.  The other 30% are called inversions.  This is when prices don't turn on a cycle window but instead move in the same direction until the next cycle.  When that happens, the colors rotate and the red becomes the place on the chart where bottoms occur and vice versa.  In summary, we are looking for gold to establish a short term low within the upcoming blue cycle and  then rally into the week of Feb 9th.  Odds on that are about 70%. Since the pattern is choppy and overlapping its good to be careful because it does warn that this rebound (so far) is a weak one.  In other words,  there is more of a chance of inversions occurring when the market is rallying in a counter trend move.  Keep that in mind.   

    Should the blue cycle make a low, the next rally into Feb would initially target the 1122-1127 area.  


  • 13 Jan 2016 10:01 AM | Bill Downey (Administrator)

    About That "Surging" Chinese Trade Data, There Is Just One Thing...


    Submitted by Tyler Durden on 01/13/2016 


    While Chinese New Year seasonals are undoubtedly one factor in last night's "surprisingly good" Chinese trade data, the following chart shows the level of "bullshit factor" was extreme by anyone's measure. Three years ago we first brought China's 'fake' trade data and abundant discrepancies to the public's attention and despite an apparent crackdown by regulators, the gaping difference between imports from Hong Kong and exports to Hong Kong is downright embarrassing for China's SAFE as it is clear that capital outflows are being disguised as exports with "over-invoicing" back in play.

    Last night, China unveiled the following double-rainbow of better-than-expected trade data with Exports shockingly positive YoY (smashing expectations of a furtther collapse)...

    Chinese New Year seasonals (export-boosting into year-end) and despite China importing a record amount of oil, or 33.2 million tons, the trade surplus apparently surged and everything is proved awesome in China.

    But, as we initially explained in 2013, one reason for the "surge" in recent data may be the demand of the new Politburo to telegraph that all is well following the recent turmoil since the magnitude of the surprise beat  could indicate exporters’ rush to finish year-end orders and government pressure to report exports before the end of the year to reach the government’s growth target.

    However, possible explanation for how Chinese companies are cooking their export books comes from none other than Goldman:

    “It is possible that local governments may have tried to boost exports data by either making round trips in special trade zones” or by exporting “earlier than otherwise in an attempt to improve the annual exports data,” Goldman Sachs’ Beijing- based economists Yu Song and Yin Zhang wrote the same day.

     

    Rushed shipments and even faked exports to secure tax refunds may have contributed to the stronger growth data, according to Alistair Thornton and Ren Xianfang, Beijing-based analysts at IHS Inc.

     

    Some trading companies are turning to transportation providers like Shenzhen Global Express Logistics Ltd. for help in shipping goods through so-called bonded zones to claim export tax rebates or charge higher import prices for goods without them physically leaving the country. Shenzhen Global offers customs clearing and other freight services including a “one-day tour,” Lin Yongtai, a manager with the company in the city bordering Hong Kong, said in a telephone interview.

     

    For a fee of 1,000 yuan ($161) per vehicle per day, the company will drive trucks into warehouses in bonded zones, where cargo must clear customs, so that businesses can obtain a refund of value-added tax on the “export” of their products or boost sale prices for goods that carry the cachet of being imported.

     

    “A poor villager can boast he has thousands of yuan of turnover every day, but people later discover he only has one bull -- he takes the bull out every morning and brings it back every evening,” Lin said. “The same applies to some parts of China’s foreign trade.

    Of course, there is also the simple test of matching one country's exports to another one's imports (after all, it is a closed loop).

    To wit... The massive over-invoicing "Exports" to HK relative to the smooth HK "Imports" from China...

     

    Once more, it appears that China is literally pulling numbers out of thin air:

    UBS economists led by Hong Kong-based Wang Tao pointed to a “quite obvious discrepancy” in the growth of China’s exports to Taiwan and South Korea and those economies’ reported imports from China in recent months, even as historically they have tracked each other well.

    Finally, that China is openly making up numbers is no surprise: it will continue doing that until, like everywhere else, the discrepancy between perception and reality (usually manifested in the case of China by a lot of angry people breaking something or simply rioting) becomes too glaring for even the most optimistically inclined to ignore.

    (End of Zerohedge Article)


    Gold Short Term

    Although we can't rule out 1067-1072 A gold low should form today (Wednesday) potentially at 1077-1080 and it could possible be the low for this week.  We've tested the 50% retracement of this rally and thus a push back to 1087-1094 (1st resistance) could be in the cards for Wednesday.   The ideal target remains 1067-1072, but lets see what gold does at the 1080 support point.  The 1080 area is the yearly 2014 support and is a logical place for price to try and bounce as well.  



  • 11 Jan 2016 10:49 AM | Bill Downey (Administrator)



    ,

    China, The End Of History And The Last Great Commodities Boom

    Jan. 10, 2016


    China's economic deceleration is occurring because it has reached a particular point of development where the easy economic gains have been made.

    Significantly lower economic growth in China is now the way of the future.

    The greatest commodities boom ever known has come to an end, with sharply weaker commodity prices now the new normal.

    Article  (Charts follow article on gold and silver)

    The drivers of global economic growth have changed with the end of emerging markets as the key engine of economic growth.

    It was only just over two decades ago that philosopher Francis Fukuyama released his controversial book, The End of History and the Last Man. In it, he expounded his theory that the collapse of communism and adoption of liberal democracy in Eastern Europe, through a series of velvet revolutions, broke the traditional paradigm through which mankind viewed history. These revolutions, he argued, symbolized the end of mankind's ideological evolution and the adoption of the final form of government.

    Now we are witnessing events of equal magnitude, with the last major socialist stalwart China emerging from the economic darkness and embracing the central tenets of capitalism and the free market system to become a global economic super power.

    The completion of this transition, I believe, signifies the end of one global developmental epoch and the emergence of a new global economic system which needs to be viewed through a different conceptual paradigm. This paradigm shift brings with it considerable changes for the global economic system and financial markets with it signifying the end of the last great commodities boom witnessed in modern times.

    The creation of the greatest commodities boom ever

    After the end of the civil war and the accession to power of the communists under Mao, China's economy stagnated. Then from the 1970s, China initiated a series of policies aimed at modernizing the nation. It was these that led to China's eventual rapid economic and social transition, triggering the greatest commodities boom ever witnessed in modern times.

    As China modernized, and the required infrastructure was developed and put in place to support its economic transition, its consumption of iron ore, coking and thermal coal, base metals and other raw materials skyrocketed.

    It pays to be a 'catch-up economy'

    The boom really heated up in the early 2000s as Beijing's economic reforms started to gain traction and the experiment with the free market began in earnest. It is easy to see why China's rate of modernization and economic growth was so rapid and fueled what is probably the greatest commodity boom of all time.

    Most importantly, at the start of the development cycle it pays to be a 'catch-up economy'.

    You see, provided that other factors are equal, poorer less developed economies grow far more rapidly than partially developed or developed countries. This is because they are coming from a lower economic and developmental baseline.

    They also have the advantage of being able to rapidly close the development gap by following the lead of developed nations through technology transfers and capital injections to achieve 'catch-up growth'.

    Another key factor in China's rapid development was the immense physical capital that it was able to access and mobilize resources in order to develop new productive assets and infrastructure.

    This is because both the size and accessibility of a country's physical capital significantly influences the pace of growth. In the case of China, these are tremendous and can never be replicated by another nation with them being specific to China.

    Foremost among them is China's copious population which is the largest of any country, thus endowing it with tremendous human capital. This human capital for a variety of socio-economic and cultural reasons was ready to be mobilized with a range of catalysts putting in motion the greatest wave of rural-to-urban migration the world has ever seen.

    In fact, this rate of migration was unprecedented, causing the population of the majority of China's major cities to double or even more between 1990 and 2000. The scale of this migration continued to grow throughout the 21st century, with an incredible 145 million migrants in 2009 alone.

    Urbanization is an important driver of economic growth, and for it to be occurring on such an unprecedented scale is one of the decisive reasons for China's rapid economic transition.

    As a population migrates from country to city seeking better lives and higher incomes, consumption patterns change. This is because a higher income per person results in a marked increase in demand for consumer goods, food, services, and accordingly, the raw materials required to produce them. Once incomes start to rise they create a growing middle-class that causes demand to surge.

    China's massive wave of urban migration created unprecedented demand for the resources to build cities as well as the transport, technology, energy and logistics to support them.

    It fueled an unparalleled construction boom that was responsible for China's construction industry becoming the single most important consumer globally of a range of commodities, including steel, copper, zinc and nickel.

    Such a massive population shift only added additional momentum to China's rapid pace of economic development with it providing a readily available and super-exploitable workforce to support the process of industrialization. Between 2001 and 2011, China's industrial output more than doubled and this rapid growth further stimulated the already swift rate of rural-to-urban migration.

    Rapacious commodities demand triggers once in a lifetime bull market

    As China industrialized and wages as well as the standard of living improved, there was even greater consumption and demand for resources. By 2011, China had become the world's single largest energy consumer and the second largest consumer of crude after the U.S. This ardent appetite for energy caused China's consumption of thermal coal and oil (NYSEARCA:USO) to double between 2001 and 2011.

    Furthermore, the surge in demand for basic materials is particularly evident when looking at China's consumption of iron ore and other metals.

    China was responsible for 53% of the world's iron ore consumption in 2011, or more than four times the amount of iron ore it had consumed a decade earlier. For the same year, iron ore imports amounted to 61% of the global total or almost eight times more than China's iron ore imports in 2001.

    The consumption of copper (NYSEARCA:CPER) grew more than fourfold for the decade from 2001 to 2011 when China became the largest single global consumer of copper.

    This swelling demand for raw materials caused the prices of commodities such as iron ore, coal and copper to soar to stratospheric heights, triggering an investment frenzy among miners as they sought to cash on the 'boom that would never end'.

    The price of iron ore peaked in 2011 at $187 per tonne or more than 14 times higher than it was a decade earlier. Coking coal, another key ingredient in steel manufacturing, peaked at $147 per tonne at the end of 2008 or almost four times its value in 2001.

    Other metals also grew exponentially in value, copper more than doubled in value between 2001 and 2011, while zinc's price by 2008 had quadrupled in comparison to 2001. Nickel (NYSEARCA:NINI) also wasn't left behind, with its price peaking in 2007 at eight times higher than it was in 2001.

    Meanwhile, China's insatiable thirst for energy saw thermal coal, its primary energy source, peak at $192 per ton in 2007 or six times its value in 2001.

    This rapacious demand for commodities triggered a soaring commodities bull market that many industry insiders claimed would never end.

    The end of the greatest commodities boom ever

    Nonetheless, like all economic bubbles, it eventually did end for one key reason, China's economy came off the boil and its economic growth began to slow markedly. By the third quarter 2015, China's GDP growth had slumped to 6.9% or 50 basis points lower than a year before and its lowest level since the global financial crisis.

    It is expected that this decline will continue and I certainly don't expect to see any return to the double-digit figures recorded during the heady days of its economic boom between 2004 and 2010.

    There are a number of reasons for this rapid economic growth and then decline.

    Key being that once a particular point of development is reached economic growth slows as the advantages of being a 'catch-up' economy decline.

    China has now reached that point on its developmental journey where rapid industrialization, urbanization and expansion of the economy has peaked and is now falling into decline. This means that future economic growth will never again reach the heady double-digit figures of the past decade, which triggered a massive demand for basic materials but will instead continue at a more sedate rate.

    The latest data out of China confirms this. China's third-quarter GDP growth rate dipped to 6.9%, its lowest rate of growth since the global financial crisis. Analysts and economists expect China's growth to slow even further, with full-year 2015 GDP estimated to be 6.5%, which will decline to 6.2% annually by 2017.

    With China being a leading buyer of commodities, it certainly doesn't bode well for their outlook and explains why commodities prices have plunged.

    In fact, I believe that what we are now seeing is a paradigm shift among commodities and the move to a 'new normal' with indicators highlighting that double-digit growth is a thing of the past for China.

    Two economic sectors that are among the largest consumers of raw materials in China are caught in intractable slumps.

    The all-important construction sector is in terminal decline as is real estate development. By November of this year, investment in real estate development was less than a tenth of what it was at the start of the year and there are signs this downward trend will continue. Substantial inventories of vacant housing, coupled with slowing rural to urban migration, means that it will be some time before there is any uptick in demand for housing.

    This reduces the pressures on infrastructure which means the demand for new and/or additional infrastructure is declining, further placing pressure on the demand for commodities.

    I expect the rate of rural to urban migration to slow even further. This is because declining rates of industrialization, reduced labor intensity in manufacturing because of technological advancements, and falling industrial output are reducing the demand for labor and keeping a cap on wages, thereby removing probably the most important incentive.

    The decline in industrial activity is already apparent. For December 2015, China's industrial activity contracted for the fifth successive month. Then there is the decline in industrial growth, with output for 2015 having halved in comparison to 2011. Not only is this impacting the rate of rural to urban migration, but it is also having a sharply negative effect on the demand for commodities, particularly steel, base metals as well as energy such as oil and coal.

    There won't be any uptick in industrial activity for the foreseeable future because of softer global demand for China's manufactured products coupled with the considerable excess productive capacity that arose during the boom years.

    Significantly lower economic growth is the way of the future

    There are a range of indicators that highlight that economic growth in China will remain sharply lower for the foreseeable future and that the days of heady double-digit growth are well and truly over.

    Key among these is that China's rapid modernization and expansion has come to an end.

    Once a certain point of economic development has been reached, the benefits of being a 'catch-up economy' decline. This is because the easy gains have been made, while the higher standards of living attained increase the costs associated with industrial activity, making these economies' exports less competitive and investment more expensive.

    As a result, economic stagnation can ensue. Industrial growth starts to languish because of declining returns and a lack of investment, while higher incomes and standards of living lead to a lack of innovation and declining productivity.

    It is clear that this is occurring in China. Industrial profits continue to decline, falling for the tenth consecutive month in November, while manufacturing investment in 2015 is down by 80% from where it was in 2011.

    Then there is the risk of China falling into the 'middle income trap'. This would see it caught in a permanent state of economic stagnation interfused by extreme boom and bust cycles, much as Brazil has experienced in recent years. The middle income trap is where a developing economy's growth slows sharply and per capita income levels stagnate, thereby trapping the economy in the middle income category. There are many causes for this, but key among them is an over-reliance on driving economic growth through the extraction and export of minerals as well as the manufacture and export of low tech goods.

    With signs of this occurring, Beijing has moved quickly to adjust its policies in an attempt to prevent China from being permanently caught in this rut and make the transition to a developed economy. This has meant creating an environment conducive to the development of wealth and emergence of a broad-based middle class.

    To achieve this, Beijing needs to rebalance China's economy from one focused on investment in infrastructure and industry to consumption-driven growth, requiring it to reverse many of the policies that were responsible for its rapid economic development.

    As a result, Beijing has instituted a range of policies aimed at fostering growth in the country's weak services sector, reining in the excessive growth of the past and promoting consumption. This means that economic growth can only slow further and that the demand for commodities will continue to decline.

    Can other developing nations pick up the slack?

    Some analysts and industry insiders are touting the emergence of a range of other developing economies as being capable of picking up the massive excess capacity that now exists globally and fueling a new commodity boom.

    Among those countries are Indonesia, Vietnam, India, Pakistan and Nigeria. But this appears highly unlikely with each of them lacking the unique characteristics that fueled China's massive and rapid economic growth, triggering the greatest commodities boom of modern time. This is because each lacks the dynamics of China as well as the massive population base, access to vital resources, broad skill and educational base and geographic size of China.

    These factors along with each of them being substantially further along the developmental curve than China when it first started to modernize, means that the rate of industrial growth, infrastructure development and urbanization will be slower and not last as long.

    What does this mean for investors?

    Despite the claims of some analysts that commodities are long overdue to rebound, what we are witnessing is a fundamental paradigm shift in how to view the global economy and commodities. The shift to weaker commodities prices is reverberating across global markets.

    Not only has it triggered the end of rapid growth among some of the world's fastest growing emerging markets such as Brazil, but it has endangered the sustainability of the global financial system. This is because many miners and emerging economies have gorged themselves on cheap debt in order to live above their means along with the forlorn hope that an imminent recovery in commodities will fund repayments.

    Clearly, there is no recovery on the way and this has left a number of commodities miners in precarious financial positions.

    Mining heavy weights BHP Billiton (NYSE:BHP)(NYSE:BBL) and Rio Tinto (NYSE:RIO) REMAIN determined to grow production while cutting costs through economies of scale to drive higher cost producers out of the market

    Bottom line

    China's emergence as a global economic super power and the abrupt end to its catch-up growth phase has created a paradigm shift for the global economy and financial markets. It signifies the end of the greatest commodity boom of modern times and a fundamental shift in the growth drivers of the global economy, with the emerging markets growth model that had dominated global growth now seemingly broken. This means that investors need to become accustomed to significantly lower commodity prices that, with the exception of crude, now appear to be the new normal.

    (End of Public Internet Article - Did not see Author listed)


    GoldTrend Charts

    Short Term

    The next short term cycle turn is in play (Dec 10th - Plus or minus 72 hours).  Odds are 70% that a pullback comes in play either at the 1112 area (reached) or the 1122-1127 area.   IF we do get this pullback,  the 1072-1085 area should be a good support zone.  The next cycle turn is January 23rd (Plus or minus 72 hours).   Any close above 1112 after Wednesday would favor higher into the next cycle and 1st resistance would become 1122-1127.



    Seasonality

    There is no doubt that gold likes January.   That is why if there is a pullback into the next short term cycle, odds favor it will be a good buying opportunity.   Any close above 1112 after Wednesday could warn of a cycle inversion and higher prices into the next blue cycle (Odds at 30%).  If we get the pullback, odds favor it will be a good trade opportunity.  If cycles play for us, then the final week of January into February should provide gold with upside.



    Gold's Longest Bear Markets

    The chart below shows the longest bear markets in gold.  If we do get a repeat,  we are still a year away from the low.   Keep in mind this chart is only a gauge for you to view the length of this current bear market and should not be considered a timing tool.  



    Silver

    The accumulation of physical silver should be a strong consideration between 10 to 14 dollars per ounce.  I personally added some for my own physical holdings.   The maximum draw down should be the 2008 low at 8 dollars.   On a short term basis,  resistance is 14.40 - 14.60 and 16.25.   Support is 13.10-13.60.


    Stock Market

    The stock market is approaching a key support area, the 34 month moving average.  Since 1975, this is where the market either crashes or supports.   Odds favor a bounce is going to be attempted between 1815-1915 on the S&P.   Any weekly/Monthly close below 16000 on the Dow would favor much lower prices.  





  • 06 Jan 2016 12:06 AM | Bill Downey (Administrator)

    Gold Medium Term

    Long Term Trend ~ Bearish since Oct 2013 @ 1361

    Long term Moving averages 1230 – 1330

    Medium Term Trend ~bearish

    Moving Averages 1126-1147

    We have been calling for a low to develop in gold between Oct 2015 and June 2016. We are now in the window to turn the trend. Now price has to perform in order to complete the bottom. Until we get two monthly closes above the moving averages and that dual yellow downtrend line, the trend is still down. On the other hand, we have tested where there is three major support lines and we have just supported on our first RED LINE on the chart. Long term readers know those lines have been on this chart for over 5 years. Those red lines are the IDEAL price range for “the low” to occur. The first clue that the real “low” is in place would be for gold to get two monthly closes above the dual gold downtrend lines. Another clue will come when the BLUE moving averages close above the red average with price above both. In summary, price and time are finally coming together for the “low” to develop.

    Gold closed the year above the first red uptrend line. As long as we are above that line, it is possible to rally toward the dual yellow downtrend channel line into Mid-Frebruary.



  • 18 Dec 2015 2:59 PM | Bill Downey (Administrator)



    Gold is catching a bid today as the stock markets sell off again today.  At one point the NIKKI was down 1000 points as the BOJ disappointed and the Dow as well has had a huge selloff in the last two days.   Add the fact that the Chinese Yuan has been down for the last 10 days against the dollar.   Add the High Yield bond market collapse and you have most likely what is moving gold higher today.


    Gold Short term

    We have discussed that in order for gold to confirm higher prices on the short term, was to see a close above 1085.  That has yet to happen.  Also,  we said that gold must close above the blue moving average and as you can see below,  we have yet to do that as well.   We have said how important the 1072-1082 area is on a number of occasions this year and as you can see, this bounce from the end of November has not been able to make that an area of support as of this update.  Indeed, today's high was 1072.  As long as we remain below 1085 on a closing basis,  the short term trend remains down.  Resistance is 1072-1085.  Support is the 1033-1044 area and then the 1023 zone and 1006.   



    Gold Cycles

    The next short term cycle turn is due Dec 25th (plus or minus 72 hours).   If we can get another low into next week, it should set us up for a January-February bounce.


    Long term Gold

    On a long term basis, gold is fast approaching the ideal time and price points.  The 21st century uptrend line is the odds favored point for where the low will occur,  but we can't eliminate the 975-1040 area.   The time range for the low is Oct 2015-June 2016.  

    But more specifically, there are two spots we are looking for a gold low and that is either Dec 2015 or March 2016.  March 2016 is the ideal spot as gold will have completed a Fibonacci 55 month bear market.  The ideal price would be in the 850 area but like we said,  we can't eliminate the 975-1040 area. Suffice to say that the bear market is approaching its end in gold.


    Commodities

    As you can see commodities have retraced all the gains made from the 2008 crash.  If this was gold, price would be at 680.  So even though gold has looked weak, it is actually a lot stronger than it looks.   The inverse of that of course is that gold could have one final leg down from this 1050 area that would most likely remove the last of the perma bulls in gold.  



    Gold Weekly Price Chart

    On our weekly chart,  the three red lines below price is the ideal range from where the low should occur.  We have reached the first line and here again, we know we are getting closer and closer to the ideal bottom.  On the other side, gold must have two monthly closes above the dual yellow trend lines just above price in order to turn the trend from Bearish to Neutral and potentially bullish.  To really be bullish,  the blue moving average is also going to have to exceed the red moving average (along with price) and obtain two monthly closes with the blue average higher.   


    SIlver is also at a major crossroad in long term support.  A monthly close below 13 dollars would allow for further price drop,  but at this point in time,  the physical accumulation of silver should be higher considered at each dollar drop from here.  



    Interest Rates

    The real bubble is the bond markets of the world.  The 34 year move from 1947 to 1981 was for the most part growth oriented until the 60's. One can argue the move from 1975 to 1981 was one of panic and that's where gold had its move from 100 to 850.  We now have completed 34 years lower in rates and stand pretty much at HISTORIC LOWS.   Odds are high that the TREND is about to change.  This time odds favor its going to be panic that drives rates higher and if you think about it,  it looks like the FED is doing just that now.  Once the sell off begins in bonds, odds are high that a major liquidity squeeze will take place.  Its already happening now and that is WHY the US Dollar has undergone such a rally as it has.  Its the most liquid and deepest market on earth.  At some point in time, odds are high that gold is going to join the upside as well.  Gold for the most part rose thru all the higher rates into 1980.  With this low in rates now,  odds are high that gold will rise IF THE INTEREST RATE PANIC kicks in.  



    Summary

    Odds favor that the final low in gold is not yet in.  Its not out of the question because we have reached the upper end of the price range and time range.  However the odds are still with gold being in its last leg down.  The best thing right now would be for gold to move lower to 850 into March 2016.  That would put high odds on the bear market in gold ending. 

    On a shorter term basis,  odds are high that a gold bounce should begin just before or after Christmas and lead to higher prices in January.  And then we'll see.



  • 14 Dec 2015 12:43 PM | Bill Downey (Administrator)

    Key Events In The Coming "Fed's First Hike In 9 Years" Week


    Submitted by Tyler Durden on 12/14/2015 09:22


    While this may well be the most important week for capital markets in the past 9 years, when the Fed is widely expected to hike rates on Wednesday, precisely 7 years to the day since it cut rates to zero, the week sets off with a quiet start today with just the Euro area industrial production reading due out this morning and nothing expected out of the US this afternoon.

    The focus on Tuesday morning will be in the UK where we get the November CPI/RPI/PPI docket. Euro area employment data and the German ZEW survey are also expected. Over in the US tomorrow afternoon, the November CPI print is the main focus (headline expected at 0.0% mom, core +0.2% mom), while average weekly earnings, empire manufacturing and the NAHB housing market index are also due.

    Wednesday is PMI day where we’ll get the December flash manufacturing, services and composite numbers for the Euro area, Germany and France. UK employment data is also due, along with the final reading for Euro area CPI. Over in the US on Wednesday the November housing starts and building permits data is due, along with industrial and manufacturing production, flash manufacturing PMI and also capacity utilization. The main focus will be the conclusion of the two-day FOMC meeting and Yellen press conference.

    Here is DB's quick summary of Wednesday' main event:

    This time last year we were convinced that the Fed wouldn't raise rates in 2015. We'll it looks like we'll be proved 15 days wrong. However with all that's going on in the world and with global nominal growth so low, it's hard for us to imagine they'll get very far in their hiking cycle. We suspect that the terminal funds rate will be lower than the market expects and certainly lower than the Fed expect. Assuming they do hike and that the US HY story doesn't escalate quickly and stop them in their tracks the main story will be how dovish they make the hike. It's hard to think they'll be hawkish given the current global uncertainty and the carnage in the $1.3tr US HY market.

    And here is BofA:

    Like the markets, we expect the Fed to raise interest rates by 25bp in December. We doubt the Fed will be able to satisfy expectations for a "dovish hike," however: the market has priced in just over two rate hikes next year and a much lower terminal rate. The FOMC is likely to stress a gradual pace of rate hikes and there may be dovish dissent. Yet we do not expect a significant decline in the dot plot or explicit forward guidance; the Fed will remain data dependent. Markets may selloff modestly on the announcement, but it should not trigger a sharp tightening of financial conditions.

    Unless, of course, as even Hilsenrath hinted, the Fed is merely hiking just so it has the green light to ease shortly thereafter, either back to ZIRP or to NIRP alongside even more QE.

    Early Thursday morning starts in Japan with the November trade numbers. That’s before we get the German IFO survey data and UK retail sales. In the US initial jobless claims, conference board’s leading index and the Philly Fed business outlook are all due. Closing out the week on Friday in Asia will be the latest China property price data and MNI business indicator reading along with the BoJ monetary policy decision.

    There’s nothing of note in the European session on Friday while in the US we’ll get the flash services and composite PMI’s, along with the Kansas City Fed manufacturing activity index. Fedspeak wise we’re due to hear from Lacker on Friday evening.

    Source: DB and BofA




    Short Term Gold

    The bottom line on short term gold is that we must close above 1085-1088 in order to see higher prices.   Resistance on the chart is at the blue moving average at 1076.  As you can see gold has NOT BEEN ABLE to overcome this key resistance.  There's also additional resistance just above the average at the midway trend line.  In summary, if we don't close above 1085-1088, then the downside potential for gold to year end remains a possibility.   



    Gold Cycles

    The other factor that is a concern is the gold cycles.   While inversions do happen 30% of the time,  that leaves the odds of this one going lower by 70% on the red cycle.  Part of the issue is that gold is now in the long term window (Oct 2015 - June 2016) to provide the final lows in gold and when that occurs, there will be a lot of volatility and as we saw on the week of August 17th (when the stock market big drop occurred) these cycles will have events that will occur and we can't expect the cycles to work at each occasion.   The good news is that the cycles do give us a very good indicator on the short term moves as to when peaks and bottoms occur.   Since it is a natural cycle, it will not disappear soon.    The next cycle is due December 25th (Plus or minus 72 hours).  The bottom line is that odds are beginning to favor lower prices into year end.  The FOMC interest rate decision will be this Wednesday.   Be prepared.



  • 08 Dec 2015 9:31 AM | Bill Downey (Administrator)


    ​Gold does not have to move Lower on Rate Hike

    by Peter Arendas 

    There are a lot of reasons why to expect that if there is any interest rate hike this December, it will be only symbolical and it will probably take quite a lot of time before another hike will occur. There are various economists who have the same opinion and they don't see any good reason to increase the interest rate right now. One of them is Peter Schiff who expects that the Fed will leave the interest rate unchanged or it will raise it by 0.25%. He assumes that both of the outcomes will be positive for gold, as the markets have already factored in substantially more than a 0.25% interest rate growth.

    How did GLD share price react in the past?

    Although theory says that GLD price should decline after an interest rate hike and it should grow after an interest rate cut, history shows that this anticipation is often wrong. The financial markets always try to predict the future development, and the interest rate change is often reflected by the asset prices before the rate change itself is officially announced. And if there was a strong trend before the rate change, the trend may get disrupted for some time, although it tends to resume after the dust settles down.

    22 interest changes occurred since the inception of GLD. In 12 cases, the interest rate was increased and in 10 cases it was decreased. The table below shows the development of GLD share price 20, 10 and 5 trading days before the rate change and 5, 10 and 20 days after the rate change.

    It is interesting that on average, GLD price grew before the interest rate change and it was in a slight decline 5 and 10 trading days after the rate change. But 20 trading days after the rate change, it was back in green numbers.

    Only in 4 out of 12 cases (33.33%), the GLD price recorded any losses 20 trading days after the interest rate hike. It declined by 4.73% on average. On the other hand, in 66.66% of cases, the GLD price recorded gains (5.08% on average). In 4 cases (33.33%), the GLD price just kept on growing, without any reaction on the interest rate hike.

    After the Fed started to cut the interest rates, GLD was down in 50% of the cases after 20 trading days. After the interest rate cuts on March 18, 2008, October 8, 2008 and December 16, 2008, a strong growth trend turned into a steep decline. It shows that GLD often reacts contrary to the theory not only after interest rate hikes but also after interest rate cuts.

    (click to enlarge)

    Source: own processing, using data of Yahoo Finance and the Fed

    Conclusion

    If the Fed hikes the interest rate during its meeting on December 15/16, it doesn't mean that gold and GLD prices must crash. The official macroeconomic data don't indicate that the U.S. economy should start to overheat anytime soon; moreover, a too strong USD may hurt not only the U.S. economy. Any rate hike will be only symbolical and it will probably take a long time before another one will occur. The markets may actually welcome that the more than a year long saga is finally over, and the GLD price may react positively. As the not-so-distant history shows, it wouldn't be the first time when GLD price grows after an interest rate hike. Adding to it the problems the gold miners have to face at the current gold prices and the high demand for physical gold, GLD presents an interesting contrarian opportunity.

    (End of Article)

    Gold Short Term (by Goldtrends)

    Gold has pulled back to the 50% retracement from the pop from last week.  Odds favor support will come in near 1062-1066 and will attempt to support.  That's the level we need to hold.  There is one final support (again short term) at 1055 but it would be better for gold to hold at 1062-1066.  Resistance remains 1085-1095 and then 1102.   In summary,  odds favor support at 1062-1066 at the moment. 


  • 04 Dec 2015 8:22 AM | Bill Downey (Administrator)



    Bloomberg Markets

    Investors look to nonfarm payrolls, the fallout from Mario Draghi's stimulus plan continues, and OPEC meets to discuss the oil supply glut. Here are some of the things people in markets are talking about today.

    JOBS DAY

    November nonfarm payrolls data is due today -- the most-anticipated piece of U.S. data to land ahead of the Fed’s Dec. 16 decision on interest rates. It would take a big surprise to derail the Fed at this point. With investor odds of liftoff when the Fed meets later this month at 74 percent, today's jobs data will probably offer more information about the pace of tightening in the months ahead than on the timing of the first hike. Economists are expecting an increase of 200,000 new jobs in the month and for the unemployment rate to hold steady at 5.0 percent. There will also be a lot of attention paid to the Average Hourly Earnings number, which jumped 2.5 percent in October.

    OPEC meets in Vienna

    Oil spiked today from near six-year lows, as OPEC ministers gather behind closed doors in Vienna today to discuss output policy. Venezuela -- leading calls for a cut in production -- pressed the point that even Saudi Arabia is troubled about low prices, but Iran signaled it doesn’t expect OPEC to do anything to its production ceiling. Iran says it is only willing to discuss output cuts when its production reaches 4 million barrels a day, while Saudi Arabia reiterated its position that other big producers outside the group, like Russia, will have to join output curbs. Oil has slumped since Saudi Arabia led OPEC’s decision last year to maintain production and defend market share against higher-cost rivals.

    Market fallout from ECB shock

    The euro pared its biggest jump since 2009, recovering after the European Central Bank's underwhelming stimulus package was unveiled yesterday. Mario Draghi's plan, which involved a rate cut and an extension in asset purchases, stung those who had piled on wagers against the euro amid expectations of more aggressive easing. Said one market strategist: "A lesson in over-positioning was delivered overnight." Other markets are still absorbing his message: German government bonds headed for their worst weekly loss in almost six months, Europe stocks fell even lower and Asian stocks tumbled. The disconnect between investor expectations and the reality delivered by Mario Draghi even caught the eye of Fed Chair Janet Yellen, who commented to Congress that “the market expected some actions that were not forthcoming.”

    (end of article)

    Gold Short term

    Gold still remains in downtrend channels on the short term. Today’s resistance points are 1063-1067 and 1072-1077 and finally 1085-1094. We need a close today above 1075 in order to turn things more bullish short term. As far as support let’s look at the medium term chart.


    Medium Term

    On the medium term chart there’s lots of support lines underneath the market. Most important for the moment is 1034-1044 and then the 1023 area. There’s also support in the 950-1000 area. Here too we are still in a downtrend at the moment. The key on the medium term is for gold to re-establish itself above the 1172-1222 area and then a monthly close above 1255. That would take the medium term out of bearish mode and at least into Neutral.


    Cycles

    Gold Short term Cycles

    At the moment it looks like this rotation below (bearish) is the one that is playing out. In this rotation the low becomes due Dec 11th (plus or minus 72 hours). Targets are 1034-1044, 1020-1023 and then 985-1000.

    As long as we are below 1072-1075 on a closing basis, continue to favor lower into next week.

    The bottom line here is that an important low is due somewhere in the first two weeks of December and from there gold should rally into year end.   That's how it looks at the moment.   Gold reached 1046 on Thursday in Asia before bouncing back after the ECB announcement.   That's really close to the 1034-1044 level we've been watching.  It comes down to the JOBS NUMBER this morning and then we'll see.



  • 02 Dec 2015 10:42 PM | Bill Downey (Administrator)

    Gold Short term

    Our last updates stated that as long as we remain below 1085 the potential to move lower could continue. Since then we hit 1075 and have turned back down to new lows (1046). We listed overall support at 1023-1044 and thus we have reached within 2 dollars of 1044. Look for 1034-1044 as support initially on Thursday and then 1020-1023.


    Gold Short term Cycles

    At the moment it looks like this rotation below (bearish) is the one that is playing out. In this rotation the low becomes due Dec 11th (plus or minus 72 hours). Targets are 1034-1044, 1020-1023 and then 985-1000.

    As long as we are below 1072-1075 on a closing basis, the trend remains down.  


  • 30 Nov 2015 3:05 PM | Bill Downey (Administrator)




    Gold Short term

    As far as the short term gold chart, there should be strong support near 1023-1044. Today is the last day of the month and also First Notice day for December Futures. Traders have moved to the Feb contract. We need a close above 1085 to neutralize the situation and then a close above 1095 in order to favor higher prices towards either 1102-1112 and or 1122-1127. As long as we remain below 1085 the potential to move lower can continue.  However, we should be on an alert here for a bounce.  Lets go to the next chart....


    Gold Intermediate term

    The question is whether gold made its low last Friday at the dotted line or whether gold is going to move lower to the red lines?   A close above 1095 and then above 1105 would strengthen the case that an intermediate term low has been established.


    Gold Short term Cycles

    We have two charts to present.

    This rotation on the cycles chart does allow for a low to be made here and launch a rally from this point. That doesn't mean that IT WILL happen that way, but a close back above 1085 and then 1094 would indeed favor that. The one thing that this chart does emit is a BLUE cycle low, which is what BULL markets produce when they are rallying. We should bear in mind the big COT changes that have occurred in the past month as it is IMPLYING that a gold RALLY is coming. It could take a couple more weeks to develop, but we should be aware it can begin at any time. A close above 1085 will be the first thing to watch for and then a close above 1095 would be the 2nd. If we close above 1095, odds favor we are moving higher into and around the Dec 11th time frame.

    First things first, we need a close above 1072-1075 and then 1085.


    Gold Cycles Alternate Chart

    The alternate view is that there has been no inversion and the downside of gold is about to accelerate lower into Dec 7th – 11th time frame. ANY CLOSE BELOW 1150 favors this scenario. Otherwise, its possible to move higher as in the first chart.





Technical Analysis :: Gold & Silver

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