Sunday, 4 December 2016

A Tradable Bounce in Gold Coming ?

I've taken my eyes off of gold price for about a week (because they looked so ugly. So i HAD to look away. I don't want to go blind). When i looked at the price of ABX while market opened yestreday, i saw a rise of some 5%, but when i looked at the gold rise, it went up some 0.4%. A rise of 5% in ABX share should be accompanied by something like a 2% to 3% rise in gold price, normally. Same thing happened in other miners. So that was no isolated incidence. This tells me that gold price would be following to go up soon as gold miners always lead the gold price. I could never able to work why. Maybe share market players are smarter than gold investors? Don't need to know why, just need to know what to make money. True in all areas in life.

So i took a look at the big picture.

If you look at the gold price using GLD etf chart, it's pretty much a waterfall drop since Trump election on 9 Nov.

3 month GLD chart as of 2 Dec 2016
3 month GLD chart as of 2 Dec 2016

But if we look at the gold miners using GDX etf, it has been going sideways since 14 Nov. My 2 fave technical indicators are also showing positive divergences.

3 month GDX chart as of 2 Dec 2016
3 month GDX chart as of 2 Dec 2016

Since GDX has been going sideways for more than 2 weeks while GDX is still taking a dive, how do i know if GLD is ready to bounce? We don't know. But here are a few clues.

1.  GLD gapped up on 2 Nov.
2. MACD in GLD is curling up.

If GDX has a bounce from here, 22.8 seems like a logical target/resistance (see chart above).

_________________________________________

These are gold's technical. Let's look at the fundamental driving forces behind it.

In the short term, both the rise of USD and 10 Year Treasury Note Yield (TNX) has been very extended, and some retracements is undergoing. This favors the rise of gold price.


The DXY is rolling over with a rounding top (or mini H&S formation depending how you look at it). Technical indicators are also rolling over. It looks like it wants to move to the 99.0 important support level. Maybe. Time will tell.


6 month chart of DXY (US Dollar Index)
6 month chart of DXY (US Dollar Index)


The 10 Year Treasury Note Yield (TNX) has just touched its 30 year (from 1986 to 2016) downtrend resistance. There're 2 probable scenarios.

1.  The rise in yield (TNX) during the Trump Jump is just a bear rally and the call of the burst of bond bubble had been premature. This is extremely bullish for gold in both the short term and longer term.
2.  This is just a small retracement in the rise in TNX (or the fall in bond prices TLT) because it's overbought in the short term. This is bullish for gold in the short term only. In other word, a tradable bounce (much like the bounce we had from early October to November just before the Trump Jump).

10 Year T Note price chart (TNX) from 1986 to 2016
10 Year T Note price chart (TNX) from 1986 to 2016

The Italian Referendum may have some effect on gold price too. Its outcome is too difficult to predict and thus its effect on the price of gold.

Next week would be crucial in development of a gold bounce in both GLD and GDX. Keep your eyes peeled.