Gold Watch

Retirement used to beckon at the age of 65 (for men) when, if you were a long-standing employee, aside of been shown the door and gradually forgotten, you received a gold watch, albeit that it would likely be a Timex as opposed to a Rolex!

Well, although it’s been just over a year since our last comment on Gold, entitled “Yellow Peril,” and, “Gold Guidance,” shortly before, it’s an asset class that we have certainly not forgotten about.

In both overviews we highlighted the likely-hood of further falls in price, together with warnings on not to follow the buying track-record of the Central Banks, excepting as a contrarian indicator, together with observations on Gold’s relationship with Japan’s Nikkei stock-index and the Japanese Yen.

Since then the $US Gold price has fallen by a further  $200, or about 15%,as can be seen below, with half of the loss transpiring over the past month or so, as the markets have anticipated the barmy antics by Japan’s policy-makers, in further trashing its currency in a futile effort to inflate away Japan’s massive debt burden.

12 Nov 14 Blog 1.

Gold-mining stocks have endured a far rougher period, as evidenced by the North American XAU index, which has collapsed by a massive 70% since $Gold’s 2011 high, half of which has transpired over the past year or so.

The chart above shows a lot of technical resistance to any rebound in price, including the 50-day and 200-day moving averages, plus the two dashed trend lines.

However, for both the physical price and for the XAU, we note the completion, or near completion, of 5-waves down, which in Elliott wave parlance suggests an expectation of a reasonable ABC bounce, with the likely targets being somewhere between $1400 and $1500 oz, based on Fibonacci retracement levels (not shown.) Furthermore, investor sentiment towards gold have become lop-sidededly bearish, just as they were lopsidedly bullish at the November 2011 high for the metal, plus the two momentum indicators shown below the main body of the chart, are oversold.

Moving on to the Nikkei and Yen correlation, an update shows that it still holds true, with the $Gold price inverted to better show the relationship.

12 Nov 14 Blog 2.

IF our projection is correct for $Gold, it also has consequences for the “born again bulls” of Japanese stocks, where the dashed blue horizontal line, at $1450 gold, suggests a possible 20% reality check for Japanese stocks and indeed the Yen.

Time will tell, of course, and it requires a close watch.

 

Advertisements

4 responses to this post.

  1. […]  What we do know, however, is what’s in the charts and that the charts are saying the Nikkei needs a very close watch, as do the charts of the Yen and the Gold price, as set out in the recent “Gold Watch comment.” […]

    Reply

  2. […] markets Overview” warning of a crash for both Oil and for Russian stocks, whereas our, “Gold Watch” missive of mid-November, observed the bearish sentiment extreme, together with the completion, […]

    Reply

  3. […] In Japan’s case, it’s been very important to watch the international value of the Yen, as this is not only closely tied to the fortunes of the Nikkei and further on for GDP, but also for other asset classes such as the price of gold, which we set out within November’s “Gold Watch.” […]

    Reply

  4. […] We will stick with the “Yen” theme again, reminding once again about its close correlation (albeit by showing it upside down) against its domestic stock-market, see “Judging Japan” of a year ago, Wall St and even Gold, last brought to our readers’ attention in November 2014’s “Gold Watch.” […]

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: