Best of the Week
Most Popular
1.Spain Ignores Scotland Lesson as Catalan Independence Referendum Could Spark Civil War - Nadeem_Walayat
2.Used Car Buying From UK Dealer Top Tips, CarMotion.co.uk Real Customer Experience - N_Walayat
3.Spanish New Civil War Begins as Madrid Regime Storm Troopers Quell Catalan Independence Rebellion - Nadeem_Walayat
4.Virgin Media Broadband Down, Catastrophic UK Wide Failure! - Nadeem_Walayat
5.Are the US Markets setting up for an Early October Surprise? - Chris_Vermeulen
6.The Pension Storm Is Coming To Europe—It May Be The End Of Europe As We Know It -John_Mauldin
7.Stock Market Crash 2018; Will it Prove to be Another Buying Opportunity - Sol_Palha
8.The Profoundly Personal Impact Of The National Debt On Our Retirements - Dan_Amerman
9.Stock Market as Good as it Gets; Like 2000 With a Twist -Gary_Tanashian
10.1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - Nadeem_Walayat
Last 7 days
“Great Rotation” Ahead; Will it Be Inflationary or Deflationary? - 21st Oct 17
The Trigger for Volatility, Rates and the Next Crisis - 21st Oct 17
Perks to Consider an Agent for Auto Insurance - 21st Oct 17
Emerging Megatrends Hurting Consumers - 21st Oct 17
A Catalyst of the Stock Market Bubble Bust - 21st Oct 17
Silver Stocks Comatose - 21st Oct 17
Stock Investors Ignore What May Be The Biggest Policy Error In History - 20th Oct 17
Gold Up 74% Since Last Stock Market Peak 10 Years Ago - 20th Oct 17
Labour Sheffield City Council Employs Army of Spy's to Track Down Tree Campaigners / Felling's Watchers - 20th Oct 17
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Gold and Silver 2016 Outlook

Commodities / Gold and Silver 2016 Dec 31, 2015 - 10:33 AM GMT

By: Jordan_Roy_Byrne

Commodities

The precious metals sector will close 2015 entrenched in a seemingly forever bear market. Most of the sector has been in a bear market for over four and a half years. Gold’s bear market will reach four and a half years in a few months. Meanwhile the US Dollar’s bull market remains strong and is likely to continue. In this article we discuss our 2016 big picture outlook for the US Dollar, Gold and gold stocks.


The US Dollar index will be a major focus of 2016. The greenback is currently consolidating and correcting below important resistance at 100. A strong break above 100 could trigger a sharp move higher. Note that the other two bull markets in the US Dollar gained strength as they neared their end. A sharp move higher in 2016 may not sustain itself into 2017.

Gold’s bear market is likely to continue in 2016 but the following chart makes a strong case for its death before 2017. No bear market in Gold has lasted past October 2016 (based on the current scale). Furthermore, note that the three other long bear markets enjoyed much larger rallies during their bears. In weekly terms, Gold has not rebounded more than 11% in two years and has not rebounded more than 15% since the bear market began.

Gold’s monthly chart makes the same case that the bear market will continue in 2016 but likely end before 2017. Gold failed to hold $1180/oz and although it could rally in January 2016 it figures to test $970-$1000/oz. There are very strong support targets at $970/oz and $890/oz. Another leg higher in the greenback would likely coincide with Gold testing one or both of those targets. Be sure to keep in mind that Gold has a tendency to bottom several months ahead of peaks in the US Dollar.

The gold mining sector has been absolutely devastated. The current bear market is already the worst ever in price and if it lasts into the second quarter (2016) then it would be the longest ever. The following chart shows the bear markets in the gold mining stocks dating back nearly 80 years. It is hard to imagine the bear market lasting much longer than another quarter or two. 

There are some positive signs for the gold stocks. First, the sector unlike Gold has not made a new low in recent months. That is a positive divergence. If gold stocks continue to hold their lows in the event of $1000 Gold, it would be a stronger bullish signal.

In addition, some recent macroeconomic developments have greatly improved the fundamentals for some parts of the sector. The crash in energy prices is a huge boon for companies who own or operate open pit mines. Fuel can amount to 30% of the cost for those mines. Also, companies operating mines in Canada and Australia are benefitting from the collapse in those currencies. The majority of their expenses are in local currencies which have lost quite a bit more value in the past few years than Gold. Some companies, because of these developments are in a better position than they were a year and two years ago.

While the long term downside risk for precious metals is quite low, we should note the likelihood of US Dollar strength and Gold testing lower levels before the bear market ends. That is the risk in 2016 but it would create an excellent buying opportunity. We remain cautious on the metals but are constructive on select companies which we expect to lead the eventual recovery.

As we navigate the end of this bear market, consider learning more about our premium service including our favorite junior miners which we expect to outperform into 2016.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2014 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife