Gold could prosper in a bear market

With gold charts in a long term downtrend there is continuing speculation about the future direction of the price of gold. Historically gold price is expected to rise in times of inflation so the current deflationary environment explains the lack of interest in gold. But this could change rapidly given economic and geopolitical issues in the world which could lead to a stock market collapse and a sell off of assets which would then make gold attractive.

Aside from gold being in demand in inflationary periods, the price of gold is inversely related to the value of the US dollar. Over the past few months there has been a big rise in the US dollar value partly due to a flight to safety of cash from Europe, the Middle East and Russia and in part due to United States Fed chair Yellen suggesting that higher US interest rates may be… Continue reading

Gold – new highs or new lows?

Gold is a store of wealth but it pays no dividend and there is always debate as to when one should invest in gold. There are currently widely conflicting opinions as to the future price of gold. There are the ultra bears such as American economist Harry Dent who is convinced that the price of gold will plummet to $750 and on the other hand there is the view that gold could reach $2000 by year end. How can these differing views be rationalised?

Gold is an attractive investment in times of inflation and when other assets are deemed to be insecure. In the current environment with a continuing bull market in equities and real estate there has been little incentive to hold gold, particularly when inflation is unlikely at least in the near future. There is also a reciprocal relationship between gold and the U.S. dollar. In times of… Continue reading

The bear market in gold is not finished!

Over the past few weeks there has been significant interest in gold stocks.  I do not see this as a resurgence for gold but simply a short term bear rally before an eventual fall to around $950.

The following daily chart of Kingsgate Consolidated is an example of the apparent resurgence that is evident in many gold stocks.  This chart is similar to those of many gold stocks and shows the formation of a base and a potential breakout with opportunities for the trader. Kingsgate

Consider the weekly chart of gold below which shows an RSI divergence, suggesting a recovery.  On the monthly chart of gold which is not shown, the RSI divergence is much stronger, supporting the contention of a recovery.  From these data it looks like gold could have at least a short term resurgence. Gold 1

On the final monthly chart of gold below… Continue reading

When will gold recover?

Gold is the traditional storage of wealth particularly in times of inflation and at times when other assets are deemed to be insecure. In the current environment with a continuing bull market in equities likely to continue, there is not a great incentive to hold gold, particularly when inflation is not a problem and in fact deflation is the concern in most developed economies.

Gold has fallen nearly 40% from its high of $US1920 per ounce some two years ago.  This year it has fallen nearly 30 percent on fears that a scale back of quantitative easing would further harm its inflation-hedge appeal. So it was not surprising that gold fell a further 3% earlier this month after the Fed announced a scaling back of its massive quantitative easing program.  This was taken as sign of economic recovery in US and had the effect of strengthening the United… Continue reading

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