Weekly Gold Chart - Updated

I have posted this chart fairly regularly now for some time to give a more intermediate term look at the gold market for those who are interested.

Not a single thing has changed for gold in over a year now. The metal is still trapped within a broad range defined on the chart. It is now working its way down toward the bottom of the range having failed to make any new weekly high. As a matter of fact, the pattern for gold has been one of LOWER HIGHS for over a year now within that range. That is suggestive of weakness.

This week the HIGHER LOW was broken and while it is still not the end of the trading session for Friday, the metal is threatening to put in a LOWER LOW within the range compared to the May close. That is a sign that the odds favor a move down towards $1200 unless it swiftly reverses and regains the $1240 level in a convincing fashion.

As said many times here to the point of taxing the reader's patience - it is no where written that a market must either be trending lower or if not, then trending higher. Markets can often move within broad, well-defined ranges for a long period of time; essentially they go nowhere. What that suggests is that supply/demand are essentially in balance within that range of prices. Unless an external development occurs which CHANGES the balance between the forces of demand and the forces of supply, the most likely outcome is a furtherance of the range trade.

I find it therefore rather disconcerting that so many of the gold-perma bulls continue their mantra of "Keep Stacking". For those who want to acquire some physical metal for insurance purposes, buying gold near the bottom of a well defined trading range makes sense. However, for those who "keep stacking" while they wait for the "any day now moon launch", theirs is a 'strategy' that has more odds of leaving them disappointed rather than obscenely rich as they dream. As mentioned above, range trades for markets are more the norm than solid, trending moves. The trending moves occur because something happens which triggers a new valuation of the underlying market whether that be an increase in the demand side of the ledger or in the supply side of the ledger.

Take for example the recent rallies in the cattle market, especially feeder cattle, and the recent sharp downdraft in the corn and bean markets. In the case of the bull market in cattle, the supply side has been constrained as ranchers and producers seek to rebuild herds devastated by back to back drought years in 2011 and 2012. The result has been increased demand with sellers of the animals in control as they have the luxury of sitting back and waiting for buyers to pay up and chase prices higher.

In the case of the bear market in the grains, the supply side of the equation continues to increase as the size of the expected harvest increases with each new USDA monthly report. That gives buyers the advantage because they have the luxury of sitting on their heels and waiting for even lower prices before committing in size.

In other words, both markets are imbalanced at the moment and seeking to find a price level or a range which satisfies both sellers and buyers that prices have reached a fair value level.

For gold to therefore move out of its range, a trigger will need to occur. Without that, gold bulls will be disappointed that the metal cannot escape from the upper boundaries of its 14 month long range. Gold bears also have not yet been able to crack prices below the bottom of the range starting near $1200 and extending down to $1180. Within this very broad range, a truce exists between both buyers and sellers. Shorter term within the range; however, there are signs that the buyers are regaining an advantage as demand is falling for available supply meaning sellers are willing to take less for their gold. As long as that is the case, the price will move lower. It will not be until they are more buyers at a lower price than there are willing sellers that the price will bottom. Trying to ascertain at what level that might occur is the business of traders.

If there is a change in either supply or demand, the market will reflect that as the price chart will change accordingly.  Until then, prognostications, predictions, rash claims, etc, about surging gold prices are just that, rash claims founded on nothing but air with no basis in the price chart or in the technical patterns. Objective viewers and students of the markets learn to dismiss all such voices and listen to the only voice that matters - that of the market itself. It and only it knows when demand and supply have come into balance.