The gold price is in a very touchy situation right now based on the weekly chart and I have a bad feeling right now that gold will get clobbered tomorrow badly on the employment report. The daily chart of the SPDR Gold Trust (ETF) shows a recent up move retracement on very light volume.
The monthly price swings are also showing me that we have a sell signal based on volume on the GLD.
There is also a very ominous looking weekly price divergence that is developing which could turn into a confirmed sell signal in the weeks ahead. I think people forget that gold can be extremely volatile to the down side. It has had an superb run since the 2001 lows, but like any market nothing goes up in a straight line. Markets need to build sideways cause after huge spikes upward as a foundation point for the next leg up.
If in the weeks ahead the SPDR Gold Trust (ETF) breaks below the 98 level then it is going to put a serious 1st nail in the coffin of gold for perhaps 2 to 3 years and we could see a 50% decline in the gold price from the all time highs.
This is exactly what happened in the mid 1970’s. Gold went from 200 down to 100 but then after 100 it shot up to 850 for the final blow off run. So if we break down to 650 then it could very well be the stopping point before another huge run to 5,500 gold price. So the question is how many in the gold crowd want to sit through a 50% 2 year decline in the gold price ? A 2 year 50% decline can be a very painful and emotional burden and cause one to doubt the entire premise of the bull market in gold.
But a 50% decline would setup up massive cause and pivot for a blow off run to 5000 5 years from now.
It is all about fear and greed and determining when the greed meter gets too high.
The gold crowd has been trying to explain away the huge surging US Dollar, and gold had performed like a champ in the face of a rising dollar, but I suspect that the inverse correlation will return again and the gold price may play catch up to the downside, QUICKLY.
Despite my bearish feelings, it is still true that the GLD has NOT YET confirmed the bearish weekly divergence. However tomorrow’s action may go a long way towards get a closer confirmation.
Most other commodities have been getting SLAUGHTERED lately and yet gold is still within inches of its all time highs. But how much longer can that go on ?
The world appears on the cusp of a MASSIVE deflationary wave that causes people, governments and fund managers to liquidate to raise cash to pay off debts. How will they do that ? Likely they will sell stocks, bonds, and commodities, and gold too ?
That is what the chart of gold is telling me right now, but again there needs to be confirmation first. I am just trying to get a step ahead of a confirmed signal here.
If I am wrong then the GLD will hold very strongly in the current price range and catapult higher again to lifetime highs. But it must do this soon otherwise it will risk succumbing to the bearish weekly divergence.