Phil Flynn, senior market analyst at Price Futures Group, channels his inner Kenny Rogers in describ...
2016 Could Be a Turnaround Year for Gold
12/01/2015 9:00 am EST
The big picture for gold suggests that 2016 could be a turnaround year, notes Mary Anne and Pamela Aden, editors of The Aden Forecast.
If gold now stays below $1080, then we could see a washout to possibly $1050. This would be a weak decline, which is bearish.
Interestingly, this latest decline—which we call a B-stage decline—could end around mid-December when the Fed announces its plan for interest rates. But for now, gold is weak below $1125.
Once this decline is over, the next upmove—called a C-stage—will begin that could start the new year off on a bright note. C rises tend to be the strongest intermediate rise in a bull market.
We’ll be watching to see if gold closes up for the year. If gold closes above $1186 on December 31, it’ll be the first up year since 2012. That too would be a good start to a turnaround.
In our view, the bottom is getting closer and the big picture is telling us to get ready for a change next year.
We all know that a strong dollar, a solid global economy, and higher interest rates are bad for gold. But we also know the dollar is closing in on a strong lid, the global economy is sputtering, and interest rates are still in a mega downtrend.
Will this continue for 2016? We think so, which will be good for gold. And at some point next year, we could start to see a major change.
Cyclically, gold has reached a low period every eight years, give or take some months. The last eight-year low coincided with the lows of the financial crisis in 2008, just a few months short of eight years.
And now, counting eight years thereafter, you come to next year, 2016. In fact, it’s completing seven years this month. So assuming gold bottoms leading up to the eight-year mark, you could say gold is getting closer to a bottom area.
The current mega downtrend is determined by the 23-month moving average, currently at $1223. Once this moving average is surpassed, gold will turn bullish.
To completely turn bullish, a gold price above January’s high at $1300 would do the trick. Then, once gold rises back above the prior two peaks at $1400, it’ll be off to the races and the old support at $1536 would be the next target.
Longer-term, a major peak could occur near the year 2020. And, at that point, the gold price could easily be well above the record highs.
This is why we recommend buying some gold and silver on weakness, if you haven’t bought already. We recommend averaging in over the months if you don’t have all of your position set, but only buy on bouts of weakness.
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