The gold price fell by $6 or 0.5% for the week to close at $1,200 as of the final trade on the New York COMEX futures exchange by Friday afternoon.

It is sometimes helpful to change our perspective on the gold market by consulting the gold mining complex. The companies that dig the precious metal out of the ground – is pricing in for their very product. As a result, the miners must have some idea on what the gold price of their product will be doing, as their corporate valuations are largely based on the price of the metal itself.

Below we show the intermediate perspective for the GDX gold miners fund on top. Immediately below, is the price of gold, both since late-2015.

Gold Price

Most importantly, is the aspect of the chart. Note where the GDX gold miners fund is positioned, relative to the gold price. The GDX is slightly below where it was at the December 2016 bottom near $18.0 (upper green highlight). Now, let us follow the green arrow downward to see what the corresponding price of gold was at the same time.

The answer? $1,125 per ounce.

The GDX is now slightly below where it was in December 2016. Consequently, we can say with some clarity that the gold miners are, in sum, pricing in between $1,110 – $1,120 per ounce for gold at the present moment.

Thus, $1,110 – $1,120 becomes a high-probability target for gold price over the coming months, and could represent a solid intermediate-term buying opportunity for investors.

 

How Might Gold Reach This Target?

We expect that the GDX-derived target will not be met with gold falling in a straight path lower. No market moves in a straight line; a significant snap-back rally is due, although it has remained elusive thus far, and we must be open to the possibility that it will start from a slightly lower level.

Still, turning to the primary gold chart below, we expect that the pending rally will bring the gold price back into the vicinity of its broken 2015 – 2018 rising trend-line (blue), which, if it were to be hit today, would equate to $1,261. Evidently, this figure is rising by the week and thus, the longer that gold takes to begin its rally, the higher it will need to advance in order to attempt to recover the broken trend:

Gold Price

 

Fibonacci Retracement Calculations

Expecting that gold may have begun its counter-trend rally from the recent low of $1,167 on August 16, we have added Fibonacci retracement calculations onto the primary chart above. Accordingly, these are shown in the light silver color according to the key. They are barely visible so as to not distract from the primary trends. The calculation levels appear toward the right side of the chart with corresponding lines.

Thus, considering that a pending rally would be counter-trend in nature until lower targets are met, the most relevant Fibonacci retracement figures are calculated from the April through August decline of $1,369 to $1,167. The exact figures:

  • 38.2% retracement: $1,244
  • 50% retracement: $1,268
  • 61.8% retracement: $1,292

Notably, the 50% retracement of the entire decline at $1,268 is close enough to the now-broken (blue) primary trend-line at $1,261 that the $1,261 – $1,268 zone becomes a highly-probable retracement range where the gold price will encounter significant resistance and likely turn lower again, indicated above by the red arrows.

 

Takeaway on Gold Price

A counter-trend bounce is due at any moment, with significant resistance expected in the $1,261 – $1,268 range. The gold mining complex is now pricing in gold near $1,110 – $1,120. This may provide the next solid intermediate-term buying opportunity. Take this opportunity to purchase your most wanted precious metals products whether they are bullion coins or bars.

 


 

CHRISTOPHER AARON
BULLION EXCHANGES MARKET ANALYST

Christopher Aaron has been trading in the commodity and financial markets since the early 2000’s. He began his career as an intelligence analyst for the Central Intelligence Agency. 

Christopher Aaron specializes in the creation and interpretation of pattern-of-life mapping in Afghanistan and Iraq. His strategy has helped his clients to identify both long-term market cycles and short-term opportunities for profit.

This article is a third party analysis and does not necessarily match the views of Bullion Exchanges. Do not consider Bullion Exchanges as financial advice in any way.

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