With the price of gold and silver coming down sharply, many investors are asking what the future price of gold will be. Although we do not pretend to have a crystal ball, we observe sufficient signals in the charts to suggest that the future price of gold points to $1,000/ozt as the most likely 2017 forecast.
The comments above and below are excerpts from an article by Taki Tsaklanos (InvestingHaven.com) which may have been enhanced – edited ([ ]) and abridged (…) – by munKNEE.com (Your Key to Making Money!) to provide you with a faster & easier read. Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner.)
The gold chart sent a clear signal this week. As seen on the chart below, gold dropped below the important $1250 level. The price of gold clearly…[moved into] the same bearish trend channel which started with the big collapse of April/June of 2013. With that, we get the ultimate confirmation that gold is still in a longer term bear market, and that it is moving to the lower area of the channel which is below $1,000/ozt.
Generally speaking, the challenge understanding gold is that it has two faces.
- On the one hand, it is an inflationary asset, rising as inflation expectations rise.
- On the other hand, it is a fear asset, rising when fear enters the market.
Throughout the first 6 months of 2016, markes were driven by fear, which is the reason why gold was rising. However, at a certain point, fear stopped acting as a primary trend, and gold stopped rising. Even if there is some inflation, gold seems to act as a fear asset at this point, and investors should respect that signal.
The Yen confirms gold’s price behavior
The Japanese Yen is said to be a global risk indicator, similar to gold. In recent weeks, the Yen has been falling steadily, after it rose sharply throughout 2015. What can we derive from that? The difficulty is that the weekly 5-year chart does not express any relevant pattern. In such a case, investors should zoom out until a relevant pattern becomes visible.
When zooming out, we observe an extremely interesting and important fact: the Yen stopped rising exactly at major resistance, at the red line on the chart below. It appears that 100 points in the Yen index has a very high importance. The fact that the Yen got so much resistance at that level confirms our conclusion from the gold market.
Warning: High Yield Bonds
Though the Yen and the price of gold both confirm that the future gold price has a very bearish bias, there is one risk indicator which is not ‘convinced’ at this point, i.e. High Yield bonds (symbol HYG). The next chart makes that point. Investors should pay close attention at which point HYG stops falling.
We would not exclude that gold would retest its 1980 highs at $850, though we do not expect gold to trade for a long time at that price level (it is more of a worst case scenario)…
What do you think? Have your say in the Comment Section below.