GOLD PRICE PREDICTION FOR NEXT WEEK
Review :
The gold and silver prices and thus also the gold and silver mining stocks have been in a
difficult and tough correction phase since August 2020. The gold price has hit lows in the range of USD 1,677 three
times . This price was last tested in the Flash Crash on August 9th.
https://youtu.be/_fgLbZyTrLA
Since then, the gold price has been slow to get on its feet. The buyers first response to the Flash Crash ended on September 3 at the familiar resistance level of $ 1,834. As a result, prices slipped again throughout September. After this, there is currently a higher low of USD 1,720 since September 29. From this level, the bulls have worked their way up to $ 1,813 in the past four weeks. Nevertheless, this route was marked by shock-like and sometimes absurd setbacks.
This was the case
last Friday, for example, when the price of gold had already climbed well above
the USD 1,800 mark, only to fall back out of the blue by almost USD 30 within
30 minutes to USD 1,783 in the late afternoon.
Of course, the $
1,800 mark is a psychological number, but this price action has been seen over
and over again over the past fourteen months. Accordingly, gold traders
confused and sideways with a slight downward twist through the large
picture. Even the sustained conquest of the USD 1,800 mark is currently
difficult for the bulls.
2. Chart analysis gold in US dollars :GOLD PRICE PREDICTION FOR NEXT WEEK
a. Weekly chart: Tight trading range between USD 1,740 and USD 1,830
Gold in US dollars, weekly chart from
October 27, 2021. Source: Tradingview
In the bigger
picture, the gold price is still in a correction. The situation will only
improve significantly if the jump over the red downtrend line is
successful. With that, the liberation strike would not be an
impossibility.(
However, the
starting position is not exactly ideal, because the manageable recovery of the
last few weeks has already cost a lot of strength. Above all, however, it
is the rather tenacious and indecisive character with which gold has pushed its
way up here since the beginning of October. A young or freshly
strengthened bull looks different and would not accept this constant back and
forth.
However, if you
zoom out further, the 14-month correction turns out to be just a healthy
digestive phase and an interruption in the higher-level bull market. So
the two uptrend channels in blue and green are still intact. Within this,
the bears could currently be granted a further setback in the direction of USD
1,690 to USD 1,700. .
Overall, the weekly chart is rather
neutral and without a clear trend. The price action in the coming weeks
will therefore probably take place in a narrow trading range between USD 1,740
and USD 1,830.
b. Daily chart: Even the 200-day line causes problems
Gold in US dollars, daily chart from
October 27, 2021. Source: Tradingview
On the daily chart,
the gold price is struggling again with its 200-day line (USD 1,792). With
this moving average still falling, the gold bulls have been biting their teeth
here since July. The stochastics are also currently turning down below the
overbought zone. This fresh sell signal could still be negated with one or
two strong trading days, but the starting length on the daily chart remains
"shaky". If the bulls come back again, a rise to the red
downtrend line would actually be logical. If the sell signals continue to
prevail, there is a risk of a relapse to the lower Band USD 1,740.
In summary, the signs of an early end
to the recovery that has been ongoing since the end of September have recently
been increasing on the daily chart. Gold would not have even managed to
regain the USD 1,800 mark and would have failed again at the 200-day
line. If the bulls come back, the next step will be the strong resistance
zone around USD 1,834.
At the same time,
so-called “tax loss selling” is slowly but surely approaching in the
USA. Many mine investors are left with losses. Should the gold price
therefore fail to crack the USD 1,800 mark on a sustainable basis soon, annoyed
investors should be able to clean the table in November and December, which could
lead to a sell-off at the mines.(
Overall, the seasonality currently does not provide a buy signal for the gold price. Typically, this analysis module does not switch to green again until mid-December. In the past, January in particular delivered steep increases in the price of gold.
Cash flow after inflation, as of October 26, 2021
© Otavio (Tavi) Costa
The picture is quite different for gold and silver mining stocks. 73% of the 50 largest gold producers present a positive cash flow in this sector after deducting the inflation rate. In addition, the level of indebtedness is lower than in any other sector.
Market capitalization precious metals sector vs. Apple (NASDAQ: AAPL ), as of October 26, 2021 © Otavio (Tavi) Costa
However, the
valuation of the health-brimming precious metals sector is tiny compared to the
overall stock market. The market capitalization of Apple shares alone is
four times greater than that of the entire precious metals
industry! Regardless of the short-term trend and despite the intact
correction, anti-cyclical value investors are currently finding a very
promising risk / reward ratio among gold and silver mining stocks in the long
term.
6. Conclusion: Gold - Still caught in the correction
The precious metals
sector is still caught in a correction. Unfortunately, the market has not
yet answered the legitimate questions as to when this correction will finally
end or whether the last low at USD 1,720 could have already initiated the trend
reversal. The current picture is too unclear and too confused.
Much more important
is the acceptance that these “difficult and confused” market phases are part of
it and that it is best to follow and sit through them patiently and relaxed
without too much commitment. These correction or sideways phases are very
suitable for expanding physical stocks of precious metals. It becomes
dangerous, however, when convinced gold bugs blindly want to impose the
actually very bullish fundamental starting position on the market. A lot
of money is then lost with leveraged speculations in the unpredictable rush of
the gold market, while the party takes place elsewhere (cryptos).
In conclusion, the gold price will most
likely continue its confusion between around USD 1,740 and USD 1,830 in the
coming weeks.
