Gold Market Update

Gold and silver are at a critical juncture – either they break down to new lows soon or a major new uptrend is about to start. Which is it? – while we cannot be 100% sure either way, we can certainly attempt to figure which way they are likely to break.
Many have been tempted to conclude, because of the dismal response to date by the Precious Metals to the growing geopolitical tensions in various regions of the world, that this is an indication of intrinsic weakness, and that they are therefore destined to break down soon, but there is another way of looking at it.
The vast majority of investors have no idea just how dangerous the worsening situation with Russia really is. The West is looking for trouble with Russia – and like most people who go looking for trouble, they are going to find it – this is a situation that could quickly lead to a World War. They have made it obvious that they are not interested in compromise – they want to overcome and subdue Russia, and the consequences are likely to be grave – especially for Europe which is on the front line. We have gone into this in detail on the site and will not look at it further here, but it deserves to be mentioned at the outset, because this could drive a meteoric rise in Precious Metal prices – and it could start with a big move that seems to come out of nowhere.
With this in mind let’s now move on to look at the latest gold charts.
We will start by looking at gold’s long-term chart, as we need an overall perspective from the start. On gold’s 15-year chart we can see that despite the rough time it has had over the past 3 years, it still hasn’t broken down from its long-term uptrend – and if this uptrend is valid, then it is clear that a huge upleg could be in prospect from here. If it were to run to the top of its major uptrend channel again, it would result in a massive increase in the price to the $4000 – $5000 area. Of course, the pattern that has formed over the past year could be a continuation pattern to be followed by a breakdown and another steep drop, but this doesn’t look like it is on the cards as it would require a significant easing of geopolitical tensions, considered highly unlikely, and a deflationary implosion, which the money printers will ‘move heaven and earth’ to avoid. Volume indicators on gold’s long-term chart look positive relative to price, with Accum-Distrib line in particular looking strong. This chart makes plain that we are at a critical juncture here.

This post was published at Clive Maund on September 1st, 2014.