Originally published by Chamber of Merchants
Gold’s Monthly Channel
Gold reached a high of roughly $1900 in 2011. That is the top of the channel. The bear market started when it failed to break higher and kept everyone tagging along with fake pumps along the way. But the trend was clearly down. However, in 2015 we say the calls for Gold to reach $950, $800, $300! From the chart it’s clear that the powers that be & the market aggressively pulled Gold out of it’s bear trend and back into the Channel. The channel has a low limit of $1204/$1174.
If gold were to break out of this channel again to the downside, I would reconsider my thesis of Gold being in a bull market.
Fundamentally, Gold is in a bull market because the powers that be, a.k.a Central Banks + Shadowy Unknowns (dramatic, i love it) are printing money like crazy. Previously I mentioned that you can print money, but you can’t print Gold & Silver. So with an ever increasing pool of paper and digital money, the precious metals sector fundamentally need to increase in price.
Gold Monthly Channel | Weekly Chart
I have expanded the detail of the monthly channel, by rendering the chart into weekly bars. Once again, don’t get too excited about Gold’s daily movement. Tell your brain that each bar is a week. Therefore, testing the upper part of the channel could take 12-24 months. Imagine the price of the mining shares [GDX] by that time. Not a bad investment, even if one is to buy and hold. The Merchant Method is my way of optimising that bull trend up to $1800 by selling high and buying low. But honestly. in my opinion, buying and holding will still make an incredible return on one’s initial capital outlay.
If I am correct about the long term trend of Gold, then even buying at the highest of highest of highs so far this year, will still result in a profit when Gold reaches $1400+, $1500+ and $1800 plus over the next few years.
“Impossible!“, you say.
Let me remind you that Gold in 2001 was less than $300 USD per ounce.
Finally, the Dollar Monthly Channel
In the chart below, I wanted to share some of my perspective with regard to the U.S Dollar’s Trading channels.
What stands out for me, which is bullish for gold, is the U.S Dollar has twice failed to achieve the higher channel. I don’t see a fundamental reason why it would break into the upper channel, especially given the weak numbers from the U.S.
Conclusion
If the Fed starts another money printing push with QE4, then the dollar can reach the upper channel, however, it would be short lived since the Fed would be devaluating the Dollar. Either that or Gold will appreciate in price.
So much more I want to share, but only so much I can do before getting out of bed.
I should look into Yoga. All this sitting can’t be healthy.