HAVE GOLD REALLY BOTTOMED?

Posted on Posted in Daily Blog Post

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This is a typical question in the mind of the serious gold investors. I wish it has bottomed but unfortunately it still has more downside to go.


In this report we are going to revisit this important question with 4 elements of analysis that I normally used for a long term investment, hopefully without any personal bias (and analyse as best as I can).

Why Gold bull market is not dead yet and what will trigger the new phase of the Gold Bull Cycle to begin?

Which one is in control- inflation or deflation? Obviously, Deflation has the upper hand now if you forget about the cost of living and the accuracy of the government’s data.

Is the Fed going to hike the interest rate soon? It is almost a certainty, rate hike is on the card but when –September or December?

Is U.S Economy growth path sustainable? It seems so but… The U.S. economy may start to shrink again according to the latest report. First-quarter G.D.P contracted at a 0.7% annualized rate, compared with an earlier estimate of a 0.2% expansion. That was roughly in line with the estimate of economists, but a sharp deterioration from the 2.2% growth we saw at the end of 2014. So, the economy does not appear to be strong and we may see the economic decline again?

There are lots of questions up in the air…

So, what is the most important question to ask so that we know that Gold bull market is not dead yet? If the Gold bull is not dead yet, when is it going to climb up again to revive the spirit of the gold-bugs?

No matter how you argue, there is one fact-the mounting high global debts (which are piling up daily), that we all can’t deny – Whether in U.S, Europe, Japan, China or even in a country like Australia with a small population, the governments are acting dishonestly (to get re-elected) and all are playing the same ‘survival game’ – Rob Peter to pay Paul – Simply To take from one merely to give to another; to discharge one debt by incurring another. They all play Q.E game too and likely, US might come back to play Q.E. again starting in 2016.

Currently, about 75% of the people are distrusting politicians. Probably, starting in late 2015 and the beginning in 2016, we will see more and more common people openly coming out to ‘hammer’ governments. That could be the time when we see the confidence in the governments is going to start ‘crumbling. That is why at that time, we could see the beginning of the new phase of Bull Cycle (according to my Long Term Cycle analysis) that could last for years (at least into 2023)

Why Gold has not really bottomed? (4 elements of analysis)

a. Fundamentals: The big players are still bearish about Gold and bullish about USD. USD Cycle will not peak till 2016-2017.They are bearish because they think that Rate hike is going to kill Gold (but I expect it to be a temporary impact). They believe that economy is picking up and getting stronger and stronger. But the strength of USD may stop the economic growth. We could see more money will flow out of commodities (sell into strength) into Bond (causing the final capitulation to ultimate peak before the bust). When the Bond busts, money will start to flow into Gold and stocks. It is almost impossible to see Gold kick off the Bull gear without the participation of the big players.

b. Technical: USD is holding the key and its bullish trend is far from over. See Charts below.
Gold Weekly trend is still down

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Gold Monthly Trend is still down. Still below 10 and 20 MA

YIELD is STILL IN UPTREND –see chart below

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c. Cycle Timing: GDM chart amazingly pin-point the major turning points but the final phase is seeing some short term cycle inversion till the month October 2015. See Chart below.

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USD Cycle is still very bullish and will continue to put a downward pressure on Gold and Silver. Silver will put a final bottom around 11-12 ahead of Gold.

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d. Sentiments: Yet to see the ‘flush-out’ phrase. I want to see 3 things happening before the major trend change in Gold: (i) The big banks declare $700 gold (ii) sudden sharp drop of about $250 in a period of 1-2 weeks only (capitulation) (iii) Most gold-bugs are feeling ‘breathless’.

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