Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GOLD HAS LOTS OF POTENTIAL DOWNSIDE

Commodities / Gold and Silver 2021 Dec 04, 2021 - 02:21 PM GMT

By: Kelsey_Williams

Commodities

Over the past year, the price of gold has made repeated attempts to move higher. Looking at a one-year price history of GLD in the chart (source) below, there is  a series of progressively lower highs which seems to indicate staunch resistance to higher gold prices…


1 YEAR GLD

Before forming any opinions about what to expect for the next for gold, we need to look at some more charts with longer-term histories. Below is a two-year chart of GLD…

2 YEAR GLD

Here we can see that the series of progressively lower highs for gold (GLD) is almost sixteen months old. We can also see that there have been no credible attempts to break through the highs reached in August 2020.

Now lets look at a five-year chart (source) of physical gold prices…

5 YEAR GOLD PRICES (average monthly closing prices)

In this chart we can see that the past sixteen months of progressively lower prices appears to be a consolidation phase. The question, then, is whether gold prices are consolidating before moving higher – or moving lower.

The next chart is a ten-year history of gold prices…

10 YEAR GOLD PRICES 

After the lows for gold in late 2015, prices moved progressively higher until August 2020. If we connect the low in November 2015 with the low in September 2018 there is a line of support that currently comes in at $1375-$1400 oz.

If gold is simply marking time before a retracement back to that same line of support, then prices could fall significantly and still maintain the overall uptrend which began in November 2015.

There is a zone of support for gold prices between $1200 – $1400 oz. where it traded for six years between June 2013 and June 2019. If gold prices were to fall to that area, that zone of support should keep prices from falling much after that. Except…

Not everything is determined by technical factors. Since higher gold prices are a reflection of loss in purchasing power of the US dollar, then a period of relative strength for the dollar would translate to lower gold prices anyway. There are no other fundamentals for gold.

Also, once gold has caught up to the effects of previous inflation, it tends to just mark time. We seem to be in one of those periods now.

Unless the US dollar continues to lose purchasing power at accelerated rates over an extended period of time, don’t expect higher gold prices. 

As far as gold is concerned, the only thing that will take its price higher is further lasting deterioration in actual purchasing power of the US dollar. 

In the meantime, gold prices could see considerable downside action. The $1375-$1400 area is a reasonable near-term possibility. (also see What’s Next For Gold Is Always About The US Dollar)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2021 Copyright Kelsey Williams - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 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