Gold to $900 - macro bearish divergence
Are the 2020’s going to be the worst decade for buying Gold? I believe so.
The argument here is part technical analysis part fundamental, followed by challenging popular arguments.
First the TA. On the above 6-month chart:
1) Price action has printed the first ‘bearish engulfing’ candle since 1953. That’s quite a statement.
2) Price action printed a higher high at resistance at the same time a lower high was printed in on RSI and Stochastic RSI. Bearish divergence.
3) Look left. Throughout history Gold price action tests the 35 year moving average (red line). It has been 20 years and price action has only gone one direction. We’re coming due for a test/correction by 2030.
Now the fundamentals - (sources below)
1) The premium paid for gold at this time is massive. It only costs $750 to extract from the ground at current wage levels yet folks are currently paying $1800+.
2) To service this premium more mining companies are springing up, gold production is increasing at a crazy rate. Production has almost increased 25% in the last 15 years.
Popular arguments:
1) “The FED is printing to infinity and beyond, the value of gold must go up!”
Back to 1990-95 period dollar supply was stable, measurement taken from here at roughly the same time Gold tested the 35 year moving average. M2 money supply to present day has increased 5.7 fold. Gold price against the dollar has increased 7 fold.
2) “Inflation is coming! Prices are going to go through the roof”
I’m a deflationist. I don’t believe for a moment we’re going to see more inflation. Why?
a) we’ve already seen it. The last 10-15 years inflation has been out of control.
b) Credit. Inflation only comes with easy credit. A monster credit crunch is coming. 2008 was just the starter. When that happens people sell anything to get their hands on cash, property, stocks, gold, the cat next-door. Cash will be king.
c) Rising interest rates. No matter what, rates will rise again. Every asset that was inflated with easy credit is in for a shock. Property,stocks, metals. Astonishingly people are using debt to buy gold - that's a whole other story in of itself.
What do you think? Is gold price in for a crunch or will prices rocket as the majority of people seem to believe?
Polite disagreement always welcomed!
WW
The sources:
“In 2005, some 2,470 metric tons of gold was produced worldwide. Since then, gold production has increased steadily to an estimated 3,200 metric tons in 2019.”
www.statista.com/sta...oduction-since-2005/
“In 2020, mining costs totalled around 775 U.S. dollars per ounce of gold produced.”
www.statista.com/sta...s-per-ounce-of-gold/
The argument here is part technical analysis part fundamental, followed by challenging popular arguments.
First the TA. On the above 6-month chart:
1) Price action has printed the first ‘bearish engulfing’ candle since 1953. That’s quite a statement.
2) Price action printed a higher high at resistance at the same time a lower high was printed in on RSI and Stochastic RSI. Bearish divergence.
3) Look left. Throughout history Gold price action tests the 35 year moving average (red line). It has been 20 years and price action has only gone one direction. We’re coming due for a test/correction by 2030.
Now the fundamentals - (sources below)
1) The premium paid for gold at this time is massive. It only costs $750 to extract from the ground at current wage levels yet folks are currently paying $1800+.
2) To service this premium more mining companies are springing up, gold production is increasing at a crazy rate. Production has almost increased 25% in the last 15 years.
Popular arguments:
1) “The FED is printing to infinity and beyond, the value of gold must go up!”
Back to 1990-95 period dollar supply was stable, measurement taken from here at roughly the same time Gold tested the 35 year moving average. M2 money supply to present day has increased 5.7 fold. Gold price against the dollar has increased 7 fold.
2) “Inflation is coming! Prices are going to go through the roof”
I’m a deflationist. I don’t believe for a moment we’re going to see more inflation. Why?
a) we’ve already seen it. The last 10-15 years inflation has been out of control.
b) Credit. Inflation only comes with easy credit. A monster credit crunch is coming. 2008 was just the starter. When that happens people sell anything to get their hands on cash, property, stocks, gold, the cat next-door. Cash will be king.
c) Rising interest rates. No matter what, rates will rise again. Every asset that was inflated with easy credit is in for a shock. Property,stocks, metals. Astonishingly people are using debt to buy gold - that's a whole other story in of itself.
What do you think? Is gold price in for a crunch or will prices rocket as the majority of people seem to believe?
Polite disagreement always welcomed!
WW
The sources:
“In 2005, some 2,470 metric tons of gold was produced worldwide. Since then, gold production has increased steadily to an estimated 3,200 metric tons in 2019.”
www.statista.com/sta...oduction-since-2005/
“In 2020, mining costs totalled around 775 U.S. dollars per ounce of gold produced.”
www.statista.com/sta...s-per-ounce-of-gold/
Trade active
Trade active:
Two charts same time frame, 10-days per candle.
Yellow line = 150-day simple moving average
Green line = 360-day Exponential moving average
First without price action. Two things:
1) Lux Algo prints a sell signal. It has been very accurate in the past and everyone seems to rave about it. I'm still on the fence, just testing.
2) 150-day SMA crossing down the 360-EMA, watch it like a hawk if you’re a gold bug. The last time this death cross occurred *following a rally*, price action collapsed 35%,
On price action the whole gold community is talking about the cup and handle formation. What very few seem to be discussing is the formation has not yet confirmed! Price action needs to test the $1500 area to confirm. If that levels fails, so does the Cup and handle formation.
What to do? Read top post ;)
10-day chart without price action
With price action
Yellow line = 150-day simple moving average
Green line = 360-day Exponential moving average
First without price action. Two things:
1) Lux Algo prints a sell signal. It has been very accurate in the past and everyone seems to rave about it. I'm still on the fence, just testing.
2) 150-day SMA crossing down the 360-EMA, watch it like a hawk if you’re a gold bug. The last time this death cross occurred *following a rally*, price action collapsed 35%,
On price action the whole gold community is talking about the cup and handle formation. What very few seem to be discussing is the formation has not yet confirmed! Price action needs to test the $1500 area to confirm. If that levels fails, so does the Cup and handle formation.
What to do? Read top post ;)
10-day chart without price action
With price action
Trade active:
This fractal on the 10-day chart is absolutely stunning. The risk / reward is huge, and not in a good way.
If <$1700 is seen, it will be very probable a 30%+ correction will occur.
If <$1700 is seen, it will be very probable a 30%+ correction will occur.
Comment:
Another lower high prints on the 10-day chart. However I nice 'W' accumulation pattern is forming.
Comment:
These two EMAs just keep on moving closer and closer - expecting volatility in the near future. The best outcome for price action would be to continue consolidation through until August 2022. However if you see price action closing toward $1700, get out..
Comment:
Looks like Gold is about to make a run for 1840, if it breaks towards 1900 it would be a case for voiding this idea.
Comment:
The recent breakout has everyone exited. Be careful, RSI testing resistance on the 2-day. Previous confirmations resulted in significant drawdowns. This RSI resistance / support conclusion will not really be known until August.
2-day chart
2-day chart
Trade active:
** bearish divergence prints on 3-month chart **
This is amazing. The entire market is bullish on the shiny yellow metal at the same time the this bearish divergence prints.
What does it all mean?
1) I think there's an excellent chance the Dollar Milkshake theory by Brent Johnson will become true.
2) A massive dollar rally never seen before followed by a massive collapse.
This is amazing. The entire market is bullish on the shiny yellow metal at the same time the this bearish divergence prints.
What does it all mean?
1) I think there's an excellent chance the Dollar Milkshake theory by Brent Johnson will become true.
2) A massive dollar rally never seen before followed by a massive collapse.
Comment:
Gold have 7 days. Seven days to stop this 6-month candle printing a monster Gravestone DOJI.
Trade active:
She's going down captain. All the way to the seafloor.
BTC
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Weblink: www.patreon.com/withoutworries
Allow 3-6 months on ideas. Not investment advice. DYOR
