Gold analysis

This commodity was once the darling of the market in 2011, when it hit a high of 1920USD/OZ. The market has since forgotten about the shiny metal, leaving Gold to drift slowly down during the last 4 years. From the technical perspective, Gold traded in a macro downtrend channel ever since the highs were reached in 2011. However, the 1000-1100 range did see some support with increased volumes. The initial breakout occurred early in 2016, quietly creeping up into the 1200 level.

This is very typical of new bull markets. When the bottom occurs, no one really notices and no one is talking about them. I was never personally invested in gold before, as i never understood why people paid for investments that yielded no interest or dividend. I am however a new convert while researching through the upcoming trends for 2017.

Firstly, i feel there is a lack of alternative in the current market. SGX stocks have mainly been stagnant for the past few months, the constant threat of rate hikes have kept traditionally hot real estate counters tame and the fragile oil market has broken the pockets of giants like Keppelcorp, Sembmarine and Ezion. The usual popular blue chips have been muted in terms of returns this yr, with no clear trends to trade on. With Gold firming up with a good support base and the potential to breakout, gold makes an attractive alternative.

Secondly, the macro picture is uncertain. S&P is at new highs while the economy is limping along, the threat of a crash ever present. Gold could be the safe haven should the long only funds exit their positions in equities in search of a place to put their money. Traditionally, Gold is the go-to investment when there is uncertainty. Even as we speak, the money managers are already net long on gold, as shown by the red color line in the Commitment of Traders report. The speculators are also covering some of the short term short positions, which suggest reduced interest in keeping prices lower than it is now. That to me, is good news.

The $1360 highs during the Brexit will be the key level to watch. Once it is broken, gold will quickly revisit $1500 followed by the $1700 range. From my gut feel, it shouldnt be a long wait from here.

World direction

Its great to be back blogging, doing what i love. I got busy and distracted with my job, hence the prolonged absence. No long stories, as my style is to cut to the chase. On with the analysis!

S&P500 daily chart. Many people were screaming for a crash, and it was understandable as 2016 has been filled with much volatility. The big red bar in June marked the Brexit event which took the index briefly below 2000, but quickly retraced upwards. My take, from the aftermath of the event is that the US market is bullish. It is a highly illogical conclusion if we judge by the array of bad news, non improving payrolls, possible rate hike in the horizon and poor exports. 

However, the market is sentiment driven, and especially so increasingly in this year, as it has become a weighing scale between long and short futures contract. It does seem which ever tips the scales will drive the market. 

The market has found support at the top of the brexit selldown around 2120, while trading range bound for the last 3 months. This has been achieved without significant selldowns, instead with mini flushes that the market is able to quickly recover from. Such price action is bullish. However, this is part of a bigger consolidation period before the next leg up can happen. For now, it is likely to continue throughout 2016 till a clear break from 2180 can be achieved. The top of this trading range could well coincide with the next rate hike in dec and possibly sell off from there. However, watching how the market trades before and after such events will illuminate the way forward into 2017.