VirtualFax

What is the gold bugs are wrong in their expectations?

FX_IDC:XAUUSD   GOLD / US DOLLAR
416 12 10
There seems to be a prevailing view (hope/wishful thinking?) here that after the FOMC Gold             will penetrate the multi-year bearish trend-line and will hit the next resistance target around $1,433 (the three year-old, Aug 28, 2013 peak, to be precise).

But what if the majority is wrong, which, obviously, is the contrarians' bread and butter.

Is anyone interested in either:

1) playing a contrarian role and provide strong technical arguments why the majority is wrong indeed; or

2) providing arguments why the chart above is flawed.

I suggest such discussion, if approached professionally, would help all of us here, betting on the bullish trend in Gold             , to become better prepared for Sep 21.

For example, as you might know, ProJack's vision is that Gold             may continue falling after the next Wed, at least down to $1,250-sh. However, he seems to be looking at it only from the support/resistance prospective, ignoring the current year uptrend line. But such rather focused-view approach doesn't necessarily invalidates the possibility...

GOLD Daily 2618 Trade 20160905

Comment: The title to this post should have obviously said "What IF the gold bugs...". Missed the typo.
Comment: Though common belief currently is that after 5 years of decline Gold finally started the multi-year rally towards the 2011 all-time high, it might not necessarily be the case. The falling wedge that began forming after Gold peaked at $1,920 might not have finished fully developing yet.

Since Gold still hasn’t penetrated the bearish trendline, the expectations are that the Sep 21 no-rate hike decision will give the metal enough of an impulse to bounce off the current year raising trendline in order to drill in the bearish ceiling a hole, large enough to escape for good.

However, if the 2011-2016 pattern turns out to be a textbook’s falling wedge, the chart below is sketching the next few years’ precious metal’s potential movements.

The period by the end of 2016 becomes a critical stretch of time that will be setting Gold up for the following decade.

Despite all the bullish enthusiasm around, at this point there are three not quite impossible scenarios that could push Gold back into falling wedge formation:

1) Sep 21 FOMC decision to hike the rate. Though the chances are currently estimated at slim 15%, until the opposite decision has been made public such move still remains a possibility. In this case the bullish trendline will likely get damaged beyond repair;

2) Sep 21 FOMC decision to keep the rate intact will likely send Gold back to $1,350 area but the impulse might not be strong enough to penetrate the bearish trendline, which, in turn, could change the sentiment from bullish to bearish and Gold suddenly becomes shorted like there is no tomorrow;

3) The bearish trendline will get penetrated but upon backtest will prove to be not strong enough to hold (i.e. the combined buying force of bulls will not be able to withstand the shorting momentum from the new high).

I hope the above will remain a pure speculation, none of the scenarios will ever unfold, and Gold will indeed continue its upward move. But if this post has made you thinking about your strategy in case the things are not unfolding as planned, that’s good enough for me. I would also appreciate comments in the constructive criticism form.

snapshot
Comment: Here is also DXY chart compared to XAUUSD, which also supports the described above doomed scenario for Gold. There is, obviously a strong inverse correlation between the precious metal and the world's most wanted currency.

snapshot


SignalSwiss published a similar long-term bullish view on USD little while ago but I just can't find it at the moment to link it to my post. If I come across it later on, I'll re-twit it here.

And apologies for two repetitive posts down below - I kept publishing this chart in the wrong box. I'm still new to the UI of this site.
VirtualFax,
Why do you think that Gold will be lower this week ?
even after the FOMC meeting result?
Reply
VirtualFax albertwt
I haven't said it necessarily will. All I'm saying is that this outcome is not impossible and my chart above published Sep 18, 21:47 EDT provides a scenario of what that could lead to. The purpose, as I mentioned in my other response on Apri's post, is to make people think about it in advance in order to have a backup plan. Just in case...
+1 Reply
albertwt VirtualFax
Ah I see, I guess it's because there is always two ways Up or Down :-)
Thanks vFax.
Reply
VirtualFax albertwt
There are indeed : )
Reply
that is what I had in mind too but to the drop of around 900 not down to the 300's at the end of the funnel
Reply
The 300's is the wedge's apex point but even in above, the worst for Gold case scenario (from today's prospective), the price itself is not expected to slide below $700 as falling edges normally get broken up in between 2/3 and 3/4 of the horizontal length of a wedge. As you can see from the picture-chart, price falling to $700-sh perfectly fits the 2/3 break-up set up.
Reply
Here is also DXY chart compared to XAUUSD which also supports the described above doomed scenario for Gold. There is, obviously, a strong inverse correlation between the precious metal and the world's most wanted currency.

snapshot

Reply
Here is also DXY chart compared to XAUUSD which also supports the described above doomed scenario for Gold. There is, obviously, a strong inverse correlation between the precious metal and the world's most wanted currency.

snapshot


SignalSwiss published a similar long-term bullish view on USD but I just can't find it at the moment to link it to my post. If I come across of it later on, I'll re-twit it here.
Reply
Love this what if synopsis of the gold folks we all love to follow plus your long term views. Thank you for documenting so concisely all the crap floating around in my head! I already had a rectangle labeled "danger zone" on my XAUUSD chart right around 1350 for your scenarios 2 and 3. And if we get above 1345, I'll be tightening up my long stops while we all look for ProJack's price action around that line or Arpi's bull market breakout!

I agree with Arpi that the KEY to what happens around 1350 is DXY and the currency wars wrapped in an approaching DCL then ICL. "It is a riddle wrapped in a mystery inside an enigma" - Churchill

Every central bank is battling the dollar to keep it stronger than their own currency, but will they succeed??? The largest of them, the EU may be too wrapped up in their political problems to have Draghi be effective. Then - everything gets reset on November 8. The US election is truly of historic proportions as it comes to the dollar and gold. Short of total economic collapse between now and then, FOMC in Dec will raise rates as they have been playing politics up until now and have to do just for credibility sake and to try to throw the dying pension funds a few basis point bone. Buckle up!
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interesting ... i have seen where the DXY is shown as currently in wave 3 up ... up and away ... the two scenarios do jive .. here is one poster's view:
USD Index- Bigger Picture
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webmiztriz PRO webmiztriz
Elliottician_SamRoy is his name...
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Good man. You made good points - too many gold bugs and too many bullish retailers. And big speculators and commercials just fck them right.
Me too, and I should switch to short side. Just I must see the year price of gold, and see if this movement still have valid reasons to go down.
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