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Has a New Gold Bull Market Cycle Started?

January 20th, 2014 · Chris Vermeulen · 15 Comments

2013 was one of the worst years for gold in a generation and the strangest part of it is that this loss came during a time in what should have been a banner year for gold. When the Fed launched its QE1 and QE2 programs, gold posted huge gains but with QE3, we only had a brief rally in late 2012, it’s been all downhill form there. The price of gold over the last year highlights just how much Europe has become a powerful driver behind gold vs. the US which has historically been the main mover.

When the European debt crisis started a few years ago, people fearing a financial meltdown in Europe put a lot of their money into gold as it was the save haven of choice.

However, with financial and political risk in Europe subsiding, we have seen money leave gold and move into other markets, hence the big outflows from gold ETF’s.

Other factors that have dragged on gold over the last year include falling jewelry demand, the loss of its role as an inflation hedge with deflation becoming more of a concern in some areas, also tax increases on gold imports in India, and the supposedly improving economy in the US. All these contributed to the selling of gold.

Gold and gold stocks crashed last year in the summer. They have since been going through a stage one base. This suggests that 2014 will mark the start of a new bull market for gold, gold mining stocks and commodities. The commodity sector as a whole should be your focus in the coming months if you want to be able to invest in something for longer than a few days or weeks and make a huge amount of money be sure to check out my gold newsletter.

Gold Market Traders & Manipulators Provide Contrarian Bullish Outlook

Gold market traders and manipulators like some of the commercial banks/brokerage firms have been verbally slamming gold, and it turns out many are not as negative as lead us to believe…

Goldman Sachs we all know are the biggest hypocrites. While advising clients to sell gold in the second quarter of 2013, they bought a stunning 3.7 million shares of the GLD. And when Venezuela needed to raise cash and sell its gold, guess who jumped in to handle the transaction? Yup, GS! So while they tell everyone to sell gold, they are accumulating as much as they can without being obvious.

There is a lot more reasons and fundamentals to be bullish on commodities and gold, but that is not the point of this technical based report.

Weekly CRB Commodity Index – Bull Market Cycle About To Start

Taking a quick look at the CB index which is a basket of commodities, it looks as though a breakout above its down trend line will trigger a new bull market in the commodity sector. While this has not yet happened it looks as though it may happen in the next few months.

On stock market that recently broke out of a Stage 1 basing pattern (new bull market) is the Toronto Stock Exchange. This index is heavily weighted with commodity based stocks. I talk about this more in my new long-term algorithmic trading newsletter.

Gold Newsletter

 

In this report I want to show you some interesting charts that are pointing to a new gold bull market cycle which looks to be starting.

The chart below of the gold miner’s bullish percent index is often misread by many traders and trade off its information incorrectly. Many for example think this index is based on stocks trading above a moving average which is no correct.

How a bullish percent index is calculated is based on Point & Figure buy and sell signals with each individual stock within the sector and in our case the gold minders ETF GDX.

Gold prices peaked in 2011 at $1923 an ounce when the gold mining stocks index was above 80%. Why is this important? Because gold stocks typically lead the price of gold in both directions, tops and bottoms.

As of today we have the reverse situation with the bullish percent index at 13% and showing bullish divergence from that of gold stocks. This is an early signal that the new gold bull market cycle is turning up and it should not be overlooked.

Also we see the 5th and final Elliott wave pattern forming and we could once again witness another multi year rally in the price of gold.

Gold Mining Bullish Percent Index – Weekly Chart

Elliott Wave Gold Forecast

Gold Miners ETF – Monthly Chart

Gold stocks have not yet broken out to start a rally as you can see in the chart below. But the important thing to note is that the daily chart has formed a mini Stage 1 Basing patterns and could breakout this week to kick start a multi month/year rally.

Gold Market Traders

Gold & Gold Stock Bull Market Conclusion:

If you have been following me for a while, you know I don’t try to be a hero and pick tops or bottoms. We all know that strategy is a losing one over the long run.

Since 2011 I have been a very dormant gold trader. Why? Because the price and technical indicators topped out and confirmed a massive consolidation or bear market was in motion.

With gold, gold stocks and precious metals about to start a new bull market, it is time to get back to trading gold and gold stocks.

You can get my daily gold, silver and gold stock analysis every morning with my gold newsletter and save 50% on your membership by joining today!

Gold Newsletter Special


15 responses so far ↓

  • 1 Lachlan Scanlan // Jan 20, 2014 at 8:09 pm

    I agree with the vain of this article…as is clear from my recent comments, however I was hoping for another smash down in gold first. The divergences are clearly apparent on the share indexes of Aussie shares I follow also. Wait and see how we go on the discount shopping opportunities… impossible to tell for sure but either way it generally appears to be getting late in the day.

  • 2 Greg Atkinson // Jan 28, 2014 at 8:45 am

    If gold were to get to $1100 USD/Oz then I would be very tempted to move into a major gold miner of GOLD ETF with a view of sitting on these holding for a few years. (maybe 5)

    Seems strange to me that the markets currently seem rattled yet gold has also fallen so I think I will sit back and see how things unfold over the next week or so.

  • 3 Stillgotshoeson // Jan 28, 2014 at 12:24 pm

    I just keep adding to the portfolio and going the dollar cost averaging route rather than try to pick the bottom.

  • 4 Lachlan Scanlan // Jan 30, 2014 at 9:57 pm

    The AUD gold price is fairly strong anyhow. With the AUDUSD probably needing to get to 80c before it will rally to a higher high (in my crystal ball) maybe the lows for AUD gold are already in. It’s possibly on it’s way back to 1800 odd in AUDs now. Last time AUD gold peaked on the back of a plummeting AUD the gold miners bottomed out just a few months before hand. What I’d like to see is the AUD gold price go back to 1800 odd, have a pull back or flag a little and then go to $7000 as part of the new currency reset 😉

  • 5 Lachlan Scanlan // Jan 30, 2014 at 10:00 pm

    Shoes although my shares have been clobbered I am quite excited about their future prospects. Is any other asset as loathed right now as these. Everybody is in pain on these things.

  • 6 Stillgotshoeson // Oct 24, 2014 at 12:16 pm

    GSR is above 70 so I am starting to buy physical silver again.

  • 7 Greg Atkinson // Nov 3, 2014 at 9:52 pm

    I am a gold bear but at current prices even I am getting interested in gold although I am possibly more tempted by gold miners like Newcrest. (ASX:NCM)

  • 8 Stillgotshoeson // Nov 4, 2014 at 9:42 pm

    I have been buying the miners too. BDR, NST, EVN and some FML as well

  • 9 Greg Atkinson // Nov 5, 2014 at 12:52 am

    Can’t say I have done any buying yet, just looking for now 🙂

  • 10 Biker // Nov 5, 2014 at 8:34 am

    Hey, c’mon Greg. It’s a crashed beer truck… . Free drinks!

    http://www.dailyreckoning.com.au/huge-upside-gold-miners/2014/10/24/

  • 11 Greg Atkinson // Nov 7, 2014 at 4:46 pm

    The short term outlook for gold certainly does not look good and its even worse for the gold miners it seems. See: Gold firms plan drastic cuts as bullion sinks http://www.cnbc.com/id/102163036?trknav=homestack:topnews:2

  • 12 Biker // Nov 8, 2014 at 12:37 am

    Sheer irony.

    DRA: “Hop aboard this cool beer truck… it’s bound for glory…”

    ….later…

    DRA: ” Hey look… a crashed beer truck… free drinks, folks!”

    Mine goodness!~

  • 13 Stillgotshoeson // Nov 8, 2014 at 10:30 am

    Have an open order for more NST through my super. Did not get them during the week, they went up not down the day after I placed the order. With gold staging a bit of a recovery last night they may go up even further Monday. Order is open for 30 days so hopefully another pull back occurs and I can get them.

  • 14 lachlan // Nov 9, 2014 at 5:24 am

    Well there goes gold and the aud. There really had not been any trend change and longer term support at 1050/1100 in usds has to be kept in mind. Gold shares still in their bear market too. So the can continues down the road and commodities are the place for discount shoppers to be focused on. No spare cash for shopping here though shoes. Trying to afford a completely new work rig with cash from go to woe in the next couple months. That stretch will have me reeling for a few months afterward too at a guess…warding off attacks from the ato etc. Maybe I’ll be cashed just in time for the bottom of the commods cycle eh…sometime next year.

  • 15 Stillgotshoeson // Nov 9, 2014 at 7:35 am

    I’m kind of hoping that gold stays sub $1350 for another year or so before having its next run up Lachlan.

    My Aus super is fully vested at the 80% maximum in the direct option for shares so can only use compulsory contributions, sal pack and dividends received to add to the portfolio at the moment. The drop in prices of the gold shares over time has actually allowed me to buy more as the percentage changes to my advantage as they fall in value and I can pick up more helping with the DCA.

    My self managed super is in better shape as I am open to more options than the restriction of asx300 shares only in aussuper.

    My investment account has been battered more than a piece of flake at the fish and chip shop as that has more spec stocks in it so that is to be expected at this point.

    My partner wants us to buy a house but I have told her I want to wait to at least 2016. I still have mates rates rental, less than $300pw still for the unit I am in.

    On a side note, it was mentioned to me that I might not be able to get a 25 year mortgage now I am (nearly) 47 so went to the bank to see how much we can borrow and over what term. We can borrow more than we need to and term is not an issue the manager said, super has sufficient funds to pay out or fund a mortgage past retirement age. Now we gget a letter every so often asking if we are ready to borrow….

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