Sunday, 23 June 2013

Two $1120 targets for gold on measured moves- and failures to re-take key levels.

Two $1120 targets for gold on measured moves.


Gold topped at $1920 at the beginning of September 2011 and had several corrective moves down to the $1520-1540 level over the next year or so. The price bounces inbetween these lows were also fairly consistent, three of the reaching very close to $1800, forming two alternative patterns. Firstly there is the rectangle range trading pattern between three lows at $1520-1540 and three highs at $1795-1800. Taking the extremes of those ranges, we have a trading range between $1520 to $1800, a width of $280. A breakdown from such a rectangle pattern might be expected to move lower by the width of the original trading range, which would take the price from $1520 to $1520-280 = $1240.

However, if you take the trading range as being from the top at $1920 to the lows at $1520 then the trading pattern was a descending bearish triangle, with a height of $1920-1520 = $400. A breakdown of this pattern might be expected to go $400 below $1520 all the way to $1120.


There is a second $1120 target based on recent price action. The ominous event that turned me bearish on gold was the early April failure to rally to retake the $1600 level after it was breached to the downside. The rally petered out at around $1600 and then there was a rollover, followed by a slightly lower minor high at $1589.40, just before the plunge down to the new intraday spike low of $1321 on Friday 12 and Monday 15 April split across the weekend. There was then a bounce into the 1400s and the formation of a bearish pennant which broke down and then crashed on Thursday 20 June in early morning hours.

The drop out of the pennant pattern occurred after almost identical price action to the April 12/15 crash. There was a failure to retake $1430 (the key high from November 2010) and a rollover, followed by a minor lower high at $1392.60, just before the plunge down to $1270 on 20 June.

The price formations are almost identical, see the charts. The first pattern saw a drop of $267.80 from $If they 589.40 to 1321.60. If the second pattern has similar consequences, the move would be from the minor high at $1392.60 to $1124.80, i.e. the line near the bottom of the chart.

I just noticed that on the daily candles chart I marked the high as $1195.80 but that does not change the target much! It would then be $1128.00.

A look at the 12/15 April plunge and implications for continuation of the 20/21 June crash.

I am looking to see whether the crash of 20 June is going to go further, down to the target of $1124.

Looking at the April 12/15 crash, the pattern is uninterrupted by the weekend, as if the weekend wasn’t even there! There are four small pullbacks or dead cat bounces, at $1480, $1440, $1400 and a slight one at $1360 on the way to $1321. Well, one every $40 then. Three are shown on the white chart and all of them on the black chart.

Those charts are 2 hour and 1 hour candles respectively, so the bounces lasted around 4 hours in each case.

Also, the US dollar did not move at all against the Swiss Franc or the Euro during the gold and silver crash. This is very unusual. The panic was in the gold camp only!


Now, what about the gold price action on 20-21 June 2013? Gold plunged down to $1280 or so and then we have seen a slight bounce to just over $1300 with the close for Friday at just under $1300. So this bounce has lasted from Thursday morning more or less to Friday night – more than 24 hours.

Panic selling has at least been interrupted this time and there has been a whole trading day of price recovery. That might imply that a bottom is in for this crash but will there be another one later?

This time, the US dollar Index USDX moved sharply up from 80.7 to 82.2, a move of +1.5, mostly in the small hours of the 20th of June, so the gold downmove was inverse to the dollar and also coincided with a fall in stocks.

Charles Nenner had a target on gold at $1280 weeks ago and he seems to have hit the mark almost exactly – but is this the final low? He sees a gold up-cycle beginning soon, though he has moved the date for the price bottom back a couple of times after apparently seeing this second crash coming. It would be interesting to see what his view is now.

Andrews Pitchfork shows current 20/21 decline was not a crash at all!

I looked at my GFT trading screen and noticed just today that the pitchfork that I drew on the gold chart on 21 June that the 1920 June decline is the same amount as the decline in late May from the bounce that occurred after the mid-April crash. The downward sloping pitchfork delineates the slope of the downtrend and a lot of the price action in it. The two blue circles lie on a parallel (lower red line)  to the pitchfork already in place and the upper red line of the trading channel is also parallel to the pitchfork. This structure encompasses trading at least back to February 2013.

The $1280 low could be the start of a tradable bounce to around $1350 but there is still a dangerous downtrend in play! There could then follow a further low to go with the blue circles that are at about $1335 and $1280 – the next visit to that parallel could be around $1225.

This chart pattern is absolutely still strongly in play after the bounce at $1280.

As yet, there is no sign of any kind of longer term upside reversal.
Failures to re-take key round number levels since September 2012:
Fairly dismal gold price action since last September! Unless you were short the market:


Thursday, 20 June 2013

Gold under $1300 - Jeff Christain was too bullish evidently!

I was fascinated by an interview of precious metals expert Jeffrey Christian on Kerry Lutz' show in late April 2013, after the gold smash that took it from $1590 to $1321 in 2 days (across a weekend) on Friday 12th April and Monday 15th April 2013.

JC is not normally credited as bullish by the goldbug crowd and has drawn a lot of criticism from them for his toned down analysis on gold's bull market. However, in this interview, he admitted that he had expected gold to hold in this correction in the $1400-1430 level, which to my mind was a critical level, being the price region that saw a lot of back and forth trading in late 2010 and early 2011.

Jeff said that he now expected the $1321 bottom in gold to hold or thereabouts, not discounting the possibility of a final move lower though. He expected gold to trade for at least a couple of years between this level and $1500/1600 before moving higher later this decade and getting to new highs by around 2020.

Well, Jeff, you were too bullish! Maybe you need to join GATA! Gold is now $1282 as I write, after taking a June swoon (on 20 June 2013) and breaking convinsingly below the previous $1321 low and also below the early 2011 low of $1309, which may be significant. I wonder now if a target of $1155 if in play.

I never thought that Jeff Christian would be seen as too bullish by a good margin too. I think that, rather than criticising someone like JC for his balanced approach to gold, the gold bugs should understand that an advisor to large corporations such as JC, with his highly informed outfit CPM Group is likely to be somewhat conservative on the upside and on the downside and is going to be talking mostly about  prices averaged over a quarter or even any given year. Jeff was on record a couple of years agi saying that a spike to around $2000 was possible and then a bear market might ensue, at least a very major correction.

In hindsight, he was close. The gold price topped at $1920 in late 2011 and now as of June 2013, there has been aa bear market of 18 months of painful downside to a $1285 low today.

Wednesday, 19 June 2013

Similar chart patterns in gold and silver from 2009 onwards and perhaps their ominous implications, especially for silver near term. 2013-06-19

Similar chart patterns in gold and silver from 2009 onwards and perhaps their ominous implications, especially for silver near term.

In July 2010, I became fascinated with the similarity in the chart patterns for gold and silver, with silver’s pattern leading gold’s by a time period approaching a year. The time gap was later to reduce to about 4 months.

These patterns, though I didn’t realise it at the time, evolved into something similar to the Three Peaks and a Domed House pattern that I saw much later described on an internet article relating to the S&P500 index late last year – and also perhaps relating to various stocks in explanatory articles on the web.

At the start, I thought this pattern was probably chart technician’s mumbo-jumbo but it has struck big time in my two favourite markets, gold and silver. Perhaps this is actually a very powerful mid-term price pattern. (For the 'idealised' pattern, please see end of article.)

The early evolution of this pattern is very bullish if you can catch the breakout after the multiple peaks occur. I had noticed in July/August 2010 that both gold and silver had multiple tops with various patterns either side that were very similar in both cases. I did post this on my blog soon afterwards. I then revised the charts once silver had its massive breakout to a peak near $50 in May 2011 and proposed that gold might follow. To my somewhat amazement, gold broke out in mid 2011 and put on $400 from $1500 to over $1900 in a matter of several weaks before peaking out at $1920 at the beginning of that September.

Much later, I was reading about the Three Peaks and a Domed House pattern and realised that I had witnessed very similar activity in gold and silver already.

Importantly, once the pattern is completed with the blow off domed house top, the implications of the pattrn are highly bearish, with the target being a return to the price at the very beginning of the pattern, as far I can grasp from what I have read.

Presumably the multiple peaks could represent some kind of distribution of the asset concerned, from strong hands into weak hands. When gold reached $1430 in Nov 2010 and then made a lower high soon afterwards, I thought that it was rolling over and an important top might be in play. The run up in price from the $681 low in October 2008 to $1430 in Nov/Dec 2010 had been excellent, more than a double, without any substantial correction, so one seemed due.

However, the gold price took a moderate correction to $1309 approximately and then went up again on its merry way in early 2011, having some choppy action again at the 1400-1430 level and then eventually moving up to $1577 as silver topped at $50. Gold’s action was subdued compared to silver’s at that time. Most of the time silver had been making new bull market highs and gold was struggling to break to a new high until finally gold broke up from $1430 to $1577 just before silver topped out at $50. There was a noon-confirmation for a long time and when the confirmation actually arrived, it signalled that silver’s run was about over! I wondered if Dow Theory had any similar features.

Later in 2011, when gold made its magnificent breakout as was implied from my old chart patterns, I noted that silver had a rally but failed to make another new high above $50. It could only make $44.28 as shown on the weekly chart in August 2011. This second non-confirmation still stands and was a very bearish sign (isn’t hindsight wonderful)! Crucially, we saw a much higher high for gold and a lower high for its sister silver in Aug/Sept 2011.

The rest is history. Gold is now $1360 and silver about $22.

The targets for gold and silver formed by the completion of 3 Peaks and a Domed House patterns are $1155.60 and $12.44 respectively, a fair way below today’s prices!

Perhaps we could be kind to silver and read the January 2010 low as the start of its pattern and then the target would be $14.65.

The start of the main August 2010 breakout in silver was about $17.50 and in gold it was $1309 in Feb 2011 prior to their respective breakouts. Gold has already nearly retraced the entire breakout but silver still has some way to go.

Presumably if the pattern actually represents some investor psychological reality, the ‘distribution’ near the start of the pattern has to be undone and the lower targets could have more validity. It is also interesting to note that the breakout after the multiple peaks going up to the final top has 2 stages with a decent correction inbetween (sometimes referred to as the ‘first floor’ of the house in other internet articles).

Gold’s current struggle to get above the $1400-1430 region recently is testament to this. It is again fighting the battle of November 2010. Maybe the weak hands that were evidently buying there in late 2010 are being challenged as we speak.

Take a look here. I have just seen n article from Lorimer Wilson that mentioned this in early 2011! He was premature with the prediction of the final top but what observation!
See also:
“Three-Peaks and a Domed House” Pattern Suggest Gold Will Plunge to $1,300/ozt!"
from 6 November 2011
I am taking a deeper look because I think the Dow 30 and S&P 500 are now exhibiting similar patterns to gold and silver in 2010-2011. Will the consequences be the same?

This diagram is similar to one I found on Market Oracle here:


Monday, 17 June 2013

1000 gold – various 1000s - plus the search for a $999 Krugerrand.

1000 gold – various 1000s!

When I first named this blog, it was late 2007 and gold was getting near to breaking through the old high from 21 January 1980, which was $850 on the London Fix or about $887.50 on the April 1980 futures price.

So, 27½ years had gone by before gold was finally about to break the back of the bear market and make a new high, so it could finally be said to have arrived at a real new bull market.

At the time, I considered names for my little gold blog. The 1000gold one stood out at me and I never really considered calling it anything else. I felt rightly that gold would reach $1000/ounce in time.

The first 1000

In fact, I didn’t have to wait long, because gold did break above the old $850 high in late 2007 and went on to rally to $1030 by March in 2008. That preceded the buyout of the famous investment firm Bear Stearns, after which gold began a sever correction back down in price. The credit crisis of late 2008 further hit the price as the even more famous firm Lehman Brothers collapsed in September and gold fell to around $680 at the low.

The second 1000

Somehow, I never doubted for a minute that gold would get back to $1000, because the financial crisis laid bare the unpayable levels of debt in the economies of the western world, in all sectors, personal, corporate and government. It revealed the shaky foundation of all financial investments that had any kind of a debt as their basis, that is, most financial assets in existence today! Gold seemed the perfect antidote.

Gold broke back through $1000 in late summer 2009 and moved quickly to around $1224. Despite the fact the speculative open interest was already at record levels as it passed through $1000, another $200+ dollars had been added to the high. Gold has so far never revisited $1000 again.

The third 1000

Jim Sinclair had his famous longstanding million dollar bet that gold would reach $1650 in early 2011. No-one took him up on his bet, which is a shame because he was wrong and gold failed to meet his target at the appointed time. However, as Sinclair ascended the podium on a sweaty early August day in summer heatwave of 2011 in London, he did so knowing the gold price had reached its target virtually that very day.

Everything seemed set fair for gold at that time. Silver had already streaked to just under $50 in Arpil and May 2011 and had crashed but was seeing a buoyant bounce back into the 40s. Gold was now in an accelerating uptrend, making new highs almost every day.

Since the British Pound was about $1.60 at the time, gold went into four figures just before it got to Sinclair’s dollar target of $1650. Gold was £1000 an ounce! As a Brit, I found that amazing. I had not really thought about gold reaching 1000 Sterling when I was interested to buy Krugerrands for £225 back in 2002. During the early 2000s, I thought it would be nice if $850 was reached and great if $1000 was exceeded but £1000? It didn’t really enter my mind until it happened.

When gold peaked at $1920 in early September 2011, it was around £1175 in sterling, quite a shocking level and a 1 ounce Krugerrand, Eagle of Maple Leaf was likely to cost about 1200 quid as we say over here. That seemed like a lot to me for a lump of yellow metal but I was very happy, because I already had some. It encouraged me to sell a bit to raise some cash, very wise, it turned out but not wise enough.

The fourth 1000

I almost omitted the Euro! Of course, during the magnificent bull market in gold, the price reached 1000 Euros. This was on the first leg of the Greek Euro zone debt crisis, in late 2010. Greeks were reportedly paying huge premiums to get gold coins at this time. I heard a report that 0.9675 ounce Saint Gaudens $20 pieces were going for about 1500 Euros as the gold price per ounce was around 1100 in the same currency.

It is strange that the initial phase of the Euro crisis took gold up to about €1400, $1900 and £1170 but as soon as it became clear that systemic bank failures across the world could happen as a result, the price cratered, as it did in late 2008. Perhaps due to financial derivatives, most of these unpayable debts would finally be due in dollars in the world’s main financial centre of New York. Therefore, the dollar was going to be demand and was due to strengthen and gold, which had recently been very overbought, was going to take a big hit.

The fifth 1000

I had hoped that the next millennial mark in gold would be a visit above the goldbugs’ favourite desire of the year 2011 – to reach $2000 per ounce. However, this was not to be.

Gold’s magnificent high of $1920 of late 2011 fell just short and was not confirmed by a new high in silver - somewhat ominous I thought, although I didn’t change my bullish view of the market. I should have. This divergence was most important. Silver had an explosive high in May while gold struggled to make a new bull market high at the time, though it eventually made it to above $1500 before silver topped and did its crash. Then later in the year, gold made a parabolic upmove to $1920 without any corresponding new high for silver. Though silver followed gold, it made a lower peak in September, not a higher one.

The correction in gold price in US dollars was getting quite severe, with several visits to the $1520-1550 level. With the pound at about $1.50-1.55, gold started to make dips down below the £1000 level. However, the pound was a bit weak against the dollar and the gold correction did not look as bad if you were a UK-based goldbug. The price recovered safely over £1000 on each occasion, which seemed reassuring.

Then, on the April 2013 crash, the price went decisively under £1000, never yet to return above it. This is the fourth visit to a 1000 level, this time in the wrong direction...

The sixth 1000

Now, as I look at my $GOLD:$XEU chart (gold in Euros), I notice that the crash of 12-15 April 2013 took the Euro gold price to a low of €1002, escaping three figures by a mere hair’s breadth! Right now, it is €1038.59, so we are awfully close to seeing a fall below 1000 Euros. ... I am going to make a quick update. The day after I posted this article, gold plunged below $1300 and now stands at $975 Euros, so this 1000 level has now been broken. Are we heading for sub-$1000 now?

The seventh 1000?

So what happens next? Will gold go into three figures again in US dollar terms? Will you be able to buy a Krugerrand for $999 or less? Sadly, it would not surprise me much, although it would shock me. Gold’s performance over the last few months has been very poor indeed and there is no sign of recovery in the price, not at all.

This is not like the crash of 2008. In that crash, the dollar strengthened by 25% and the US dollar index went from about 71.3 to 90. Just about everything else, except for Treasury bonds, crashed: gold, silver, oil, just about all other commodities, most stock markets, most housing markets in the western world, bank balance sheets, you name it.

It is true that the current gold decline at 32% ($1920 to $1321) is not (yet) quite as great in percentage terms as the 2008 decline, which was about 34% ($1030 to $680).

However, gold, silver and to a lesser extent some other metals have been almost alone in declining in the face of a recovery in house prices, fairly stable bond prices and significant new highs in the US stocks indexes, as well as big run-ups in other stock markets such as those in the UK, Germany and especially Japan. Gold has tremendously underperformed, to the extent that the Gold:S&P500 ratio has gone from 1.6 to about 0.8. US stocks have outperformed gold by about 100% in the last 18 months!

There is not really much sign of a turn. Stocks have had a little stumble lately (especially in Japan!) and gold has been pretty flat during this hiccup. In the last couple of weeks, the US dollar index, which had been strengthening, has been hit from about 84 to 81 but with practically no upside response from gold. This shows the true weakness in this market, as it means that is must therefore have declined in almost all other currencies and is back at the mid-April lows when priced in most of them. That is inauspicious in my view.

Maybe we are nearing the bottom in gold. Possibly we have passed it but I would not bet on it. The chart still looks fairly awful and primed for a possible decline. My guess would be another $240-270 from where it is now at $1385, at the tip of a pattern that looks like a possible bearish pennant. So a move to $1115 is possible, though a plunge into 3 figures looks doubtful on any imminent decline. Maybe there will be a bounce and a further leg down to new lows. I think $890 is possible. This would be a Fibonacci style ‘golden ratio’ 61.8% correction of the entire bull market that went from $253 to $1920. By amazing coincidence $890 was the high on 21 January 1980 in the gold futures market!

In that case, the correction or bear market in gold would be similar to the 60+% correction of the uptrend in the middle of the 1970s bull market, possibly paving the way for a manic 8-fold bull market mania to follow as per the period 1976-1980, which, taking into account the slower pace of the post 2000 bull market, could take gold to $8400 between the years 2020-2025, in my estimation.