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Gold Price Trend Forecast for 1st Quarter of 2012

January 18th, 2012 · Chris Vermeulen · 5 Comments

Over the past five months gold has fallen sharply and is no longer headline news which it once dominated back in 2011 when it was making new highs every day. The shiny metal has been under pressure because traders and investors started to pull some money off the table to lock in gains.

Gold prices had surged so fast most advanced traders knew that final high volume surge was not sustainable. But the main reason gold topped out in my opinion was because the US Dollar index had put in a bottom and started to build a base. As we all know a rising dollar typically means lower stocks and commodity prices.

I have posted some charts below covering gold in detail using multiple time frames. The weekly which is long term, daily which is the intermediate trend and the 4 hour chart which shows gold momentum and intraday action. At the very bottom I talk about the US Dollar and what is happening with that.

Gold Weekly Long Term Trend Analysis

The weekly chart is not the most exciting time frame to follow as you will grow old watching it. That being said it is crucial for understanding the long term trend, price and volume analysis.

Below you can see that gold’s recent pullback has been a 3 wave correction, which is a normal pullback for any investment. But taking into account the rally from 2008 – 2011 I feel this pullback will have one more low put in before bottoming out. This would make for a 5 wave correction much like what happened in 2008.

Gold Trend Forecast

Daily Chart of Gold Showing the Intermediate Trend

The daily chart allows us to see gold intra-week price action and use the 150 moving average which is my preferred daily moving average. As you can see we are getting a similar pullback as 2008 with gold now trading under the 150 MA.

I would like to see gold make another lower low in the next 2-3 months. If that happens I feel it complete the correction and trigger a strong multi month or multiyear rally in gold.

Gold Price Forecast

 

4 Hour Intraday Chart of Gold

The 4 hour chart of gold allows us to see all the intraday price action which would normally not be seen with a daily chart. It also gives us enough data to build our analysis upon.

My preferred setup for gold which I feel if happens will trigger major buying in the yellow metal. If/when we get a rally in gold would also likely mean some more economic uncertainty has entered the market either from within the USA, Europe or China…

Gold Trading Newsletter Forecast

 

Weekly Dollar Index Long Term Analysis

The dollar has the potential to rally to the 87 – 88 level before putting in a major top. For this to happen we will need to see the Euro crumble (both currency and countries divide) in my opinion.

If you look at the weekly chart of gold and this chart of the dollar index you will notice that gold topped when the dollar bottomed. Over the past couple year’s gold and the dollar have had an inverse relationship to each other.

With all kinds of crap about to hit the fan overseas I think it’s very possible gold will rally with the dollar. Reason being there is way more people overseas who want to unload their euro’s and with all the negative talk and doubt with the US Dollar individuals will naturally want to buy more gold.

Dollar Index Trend

 

Weekend Trend Trading Conclusion:

In short, I expect a bumpy ride for both stocks and commodities in the first quarter of 2012. With any luck gold will pull back into my price zone shaking the majority of short term traders out just before it bottoms.  And we will be positioning ourselves for a strong rally buying into their panic selling.

To just touch base on the general stock market quickly. I have a very bearish outlook for stocks. If the dollar continues to rise it is very likely the stock market will fall into a bear market. So I am VERY cautious with stock at this time.

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5 responses so far ↓

  • 1 Trading Coach // Jan 19, 2012 at 12:36 pm

    Wow, I read in another article that this is the year for gold and silver, with China and Central Banks banking on the metal…

  • 2 Stillgotshoeson // Jan 19, 2012 at 3:16 pm

    Last 2 weeks of March are going to define Gold (and Silver) price movements for the Quarter.

    Longer term trend for Precious Metals is still up.

    Still sticking with my strategy of buying Gold Miners and Silver Bullion on dips.

  • 3 Ned S // Jan 19, 2012 at 7:13 pm

    March is when Greece is primed to implode Shoes. Saw something a while back that suggested the Germans could sell their gold in an attempt to keep things together?

  • 4 Lachlan // Jan 20, 2012 at 4:44 am

    Greek one year bonds 466% yield Ned. There is a printfest coming that will blow your socks off.

    The metal will go higher imo Shoes so any discount now is to be grabbed with both hands.

  • 5 Greg Atkinson // Jan 20, 2012 at 8:32 am

    I get the feeling that gold is either going to zip upwards or come crashing down and that nobody really has a clue what will happen 🙂

    The only reason I tend to be bearish about gold is because there is a huge amount of it sitting in vaults..in other words there is no shortage of the stuff.

    It just keeps piling up in vaults because well, it’s gold. If we put a price on gold based on what on the average cost to mine it was then I believe the price is roughly around $800 USD an ounce and at that price the efficient gold miners would still make a profit. (this is just a rough guestimate)

    So once gold fever runs its course a price of $1000 USD or lower would not be out of the question…or?

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