-- Published: Friday, 22 August 2014 | Print | Disqus
A positive for gold is that China just allowed three more banks, including a foreign lender, to import gold into China. This is yet another sign that China, the world’s largest gold buyer, is getting very serious about making Shanghai a gold trading hub. Fifteen banks are now licensed to import gold into China. Licensing does not mean the banks have to import at this moment. They will begin to import when gold demand picks up. What’s important is that this is a very important step being made my China to make it a very important player both in determining gold fix prices and in trade.
Gold hasn’t moved much since my last report. Silver and copper have been the movers, but mainly to the downside. Gold has not been able to hold gains provided by the Ukrainian or Israeli world conflicts. The next event gold traders will be looking at are statements out of Jackson Hole, Wyoming where Central Bankers meet starting now. Analysts will be looking at the speeches Central Bankers make to get an idea about where in the interest rate cycle each banker is. We’ve seen the Bank of England step back in terms of raising its interest rates. The “thought” was that the Bank of England would have been the first of the major Central Banks to begin the process of raising interest rates. The US might take over that role.
In my last Gold Report I stated and continue to state that a higher trend is at hand in the Dollar. Investors who dumped their currency in favor of owning gold which is priced in Dollars have been able to avoid some of the decline they’d have felt if they just held their currency. An added bonus to them would have been if gold had rallied, but it hasn’t.
I don’t have any new gold trades right now, so let’s use this letter to discuss seasonal and monthly guidelines I am studying.
Look at the chart below of the Dollar Index with Gold prices overlaid on it.
While a rising Dollar doesn’t automatically mean falling gold prices, a rising Dollar often works against gold prices.
I think it important to now look even harder than normal at the seasonal chart. If gold is going to find its footing, it’s often between mid-August to mid-September.
Let’s look at the Historical Gold Chart, using just the past 5 and 15 Year time frames. I dropped the 30-year time frame as I think it too outdated to be reliable for the analysis I use, but I do look at it nonetheless. In fact there’s not much I don’t look at when it comes to gold cycles.
Pay attention to the Bear Year label. The market doesn’t follow this pattern very often. If the market is neutral, the “grey” line is followed and in bull years the “green” line is the trajectory prices follow. Bear years are labeled in “red”.
The upper part of the chart is the price pressure that normally occurs. It means that during certain frames, even if the market is confirmed bearish, you don’t sell breaks. Rather, you wait for rallies that fail to get short off on.
Look hard at mid-August through mid-September time frame. Prices often rally during this time. So far that isn’t occurring which is another bearish factor, one that has me looking for divergence.
Let’s define divergence as meaning that prices don’t rally as they do in both neutral and bearish years. If this continues, the odds favor my analysis of prices returning to the $1200 level is likely.
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As you can see on the Monthly Chart, the first leg down began on September 11, 2011. The first leg was completed when prices recently dropped to 1241.7, the first downside target. It remains to be seen if other legs will be met, but given that this study resembles Swingline’s, until 1392.6 on this particular chart is taken out, the remaining Price Counts remain active.
Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. Chart data is courtesy of LGP-IraCharts. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc. or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are not indicative of future performance.
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-- Published: Friday, 22 August 2014 | E-Mail | Print | Source: GoldSeek.com