Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver Edge Lower While Stocks Rise on Trade Talk
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 1 17 2019
By: Ira Epstein

Debt, Division, Dysfunction, and the March to National Bankruptcy
By: Stefan Gleason

Stock Market Volatility Reflects Systemic Instability
By: Dave Kranzler

Wyoming Legislators Want State to De-Risk Investments by Holding Gold and Silver
By: Jp Cortez

Merk Research - U.S. Equity Markets
By: Merk Research

Federal Reserve Confesses Sole Responsibility for All Recessions
By: David Haggith

No for Brexit Deal, Yes for May. And What for Gold?
By: Arkadiusz Sieron

Beware! These Guys Are Good...
By: Rick Ackerman

Political Turmoil in UK and US Sees Gold Hit 2 Week High
By: GoldCore

 
Search

GoldSeek Web

 
Pullback Ahead in Gold


 -- Published: Friday, 28 December 2018 | Print  | Disqus 

By David Brady, CFA

Last week, I discussed the Bull and Bear cases for Gold. The stock market sell-off that began on October 3, the associated fall in bond yields, increasing expectations that the Fed would be forced to reverse policy, recent weakness in the dollar, and Gold rising in yuan terms have all contributed to Gold’s rally since September 28th.

The rise in XAU/CNY, in particular, has finally cast some doubt on the “yuan as good as Gold” argument, as the yuan has weakened ~9% against Gold since August 16th. For those who still question the China connection to Gold, this was also the same day that Gold bottomed at $1167. USD/CNY has been relatively stable since then, so all of the move in XAU/CNY factored into Gold’s rise in dollar terms. Why would China devalue the yuan in Gold terms? Perhaps because the previous midpoint for Gold at ~8200, yuan was deflationary for China at a time when it is dealing with slowing domestic growth and a trade war with U.S . This could continue to support a Gold rally in dollar terms, but the risk remains of a sharp move higher in USD/CNY if the U.S.-China trade dispute escalates.

Since July, my base case for a sustainable bottom in Gold and a massive rally to follow has been a Fed reversal in policy that would mean the peak and fall in the dollar and USD/CNY. Given the ~25% drop in the S&P since its all-time-high at 2941 on October 3, expectations for a Fed policy 180 to rate cuts and QE have risen dramatically. This is most evident in market forecasts for interest rate hikes in 2019 being erased almost overnight and the drop in the 2-year treasury yield from 2.98% to 2.54% today. The risk to this scenario is that stocks rally significantly without a Fed reversal in policy, increasing expectations for rate hikes in 2019 once again and weighing on Gold prices. However, as I shared in my previous article, I do not believe we can have a sustainable bottom in stocks without a Fed reversal in policy, so any rally ahead of that is doomed to fail, in my opinion. The key question is how low we go in Gold terms if and when such a stock market rally occurs. In the short-term, it looks like we are due a pullback in Gold soon.

Stocks remain near their lows and could go down to lower lows yet, but the odds of a significant rally are increasing. Gold has risen $114 from its low of $1167 and is now extreme overbought short-term per its RSI. Gold is also setting negatively divergent higher highs per its DSI (Daily Sentiment Index) and MACD Histogram. Its MACD Line is now higher than its April peak at $1369 and approaching February peak levels.1293 is the 61.8% Fibonacci retracement of the entire decline from 1360 to 1184 on a closing basis. Gold’s rally is also parabolic in nature, and those are the most fragile to breakdown.

Lastly, Gold is also running up against its weekly and monthly trendline since the bottom in December 2015, former support now resistance. And the month of December is almost done.

At the end of the day, we have not seen the inevitable Fed reversal in policy “yet”, and the risk of escalation in the U.S.-China trade dispute remains a risk. A stock market rally at the same time Gold is overbought and hitting resistance could trigger a sizeable pullback. The key question is: how low do we go? That said, the Fed will be forced to reverse policy or risk total collapse of the stock market and monetary system, and Gold will soar once that reversal occurs. Its recent rally confirms this. So use the coming decline to average in on the long side, in my opinion. Gold is only going higher long-term.





David Brady has managed money for over 25 years for major international banks and corporate multinationals both in Europe and the US, with experience in Bonds, Equities, Foreign Exchange, and Commodities

In 2016, he created GlobalProTraders.com, an interactive online community for traders to share their views on financial markets.


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.You may copy, link to or quote from the above for your use only, provided that proper attribution to the source and author is given and you do not modify the content. Click Here to read our Article Syndication Policy.

 

 


| Digg This Article
 -- Published: Friday, 28 December 2018 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.