The Gold Price Outlook as 2013 Ends

The Long Bearish Gold Price Journey is about to Take a Break

Gold is expected to make a short-term bullish break (correction) before it continues its Long-term Bearish Trend.

• Current Gold Price: $1,202.73
• Short-Term Target: $1,233, $1,250, 1,270, $1,320
• Stop-Loss: $1,179-$1,185
• Long-Term Target: $1,088

But before investigating further the future course of the Gold Price, let’s evaluate the previous TCI signal on GBPUSD and GBPJPY.

The Previous TCI Signal of Trading Center

On the previous signal, TCI has indicated a correctional bearish trend of GBPJPY. By that time GBPJPY was traded at 167,591. After some trading days, GBPJPY reached 166,500 (December, 17th), at that levels the demand for British Pounds proved strong and turn GBPJPY bullish again.

(I) The Gold Price Fundamental Analysis

This Analysis will commence from the evaluation of major fundamental factors regarding Gold and it will end with the evaluation of the current Gold Price technical analysis.

The FED Tapering Policy is about to Change Everything in the US Markets

The Federal Reserve’s recent decision to scale back it's tapering program (bond-buying) program starting in January 2014 caused increased volatility in the gold market recently. The Fed announced its decision to reduce the pace of bond asset purchases to $75 billion per month from $85 billion per month that it is today. In the next TradingCenter analysis we will investigate further this important fundamental issue. In a few words, we may see that the end of the current high tapering program will be followed by a new period of increased US Dollar interest rates. Consequently, the impact on the US financial markets will be great and lead to:

1) Higher US Interest Rates

2) Stronger US Dollar against all other Majors

3) Falling Commodity Prices (Precious Metals)

4) Falling US Stock-Markets

As US markets are connected to all other major global markets we should expect the impacts of the FED decision to spread all in over the world. This impact is expected to strengthen at the start of the second quarter of 2014.

Why the Gold Market is so connected to the FED Decision Making regarding Bond Purchases?

Some important facts about Gold:

1. First of all the FED decision to reduce Bond Purchases means that the US Economy is stronger than before and that is bad news for Gold as Gold historically plays the role of the investor safe-haven in periods of turmoil. As turmoil periods are now far away, the role of Gold as a safe-haven is losing strength.

2. Gold as an asset class does not offer any interest rate to its holders. As we enter a new period of higher US rates, investors will be tempted to sell gold and buy asset classes offering interest in their funds.

3. The change in the FED tapering program combined with higher interest rates is expected to strengthen the US Dollar against all other majors. Don’t forget that Gold is priced in US Dollars, and thus when US Dollar is going up then all commodities priced in US Dollars have the tendency to go down.

The Price of Gold in a Longer Time-Frame

The Gold Price fell recently below the level of $1,200 per ounce. That is probably the short-term signal of a longer-term Gold Price downtrend. That trend seems to be based on fundamental and technical analysis factors so it will probably evolve very fast during the first semester of 2014. The first target of the long-term downtrend is set at $1,087.

(II) The Gold Price Technical Analysis

Currently, gold is found at $1,202.73. The technical analysis of Gold, according to the latest price action, may be considered as short-term correctional bullish. The first target price of this correction is $1.233, and after $1.250, 1.270 and $1.320. The stop-loss recommended is at levels: $1.179-$1.185. The first Long term target for Gold is stable at $1.087, as we have already mentioned.

Chart: MT4 Gold Chart (2002-2013)

What TCI Suggest about the Short-Term Gold Price Course?

TCI has indicated a beautiful Gold Price reversal in the 19th of December 2013. TCI today is found at -9.28%, which is a sign of a short-term oversold market. I have added a historic TCI chart on Gold to show the long-term range of TCI indications. The following TCI Gold chart starts in January, 1st, 2002 and ends in the middle of December 2013. Note that at periods when TCI is entering the area between TCI=-23% and TCI=-27% we are witnessing great short-term uptrends. But even the current indication of about TCI=-10% has given good correctional uptrends in the past.

Chart: TCI Chart on Gold (2002-2013)

TCI Analysis Summary:

1) TCI forecasts a correctional uptrend after the 19th of December 2013

2) The TCI value of =-10% has indicated short-term uptrends in the past.

Therefore according to TCI, the gold price will probably correct for a short period and then enter again to its bearish master trend. Traders must be extremely careful and note that the master trend remains bearish. If they want to trade Gold they should place a stop loss order, at least $1,175 per ounce. If the Gold Price goes lower than $1,175, we may witness Gold in the area of $1,087 or even at $1,040-$1,050.

 

The TCI Gold Forecast Table

Here is the TCI indications & forecast regarding the future course of the Gold Price.

Table: TCI Gold Forecast Table

Time	Close	High	Low	Volume	Change	Volatility	TCI
2013.12.19	1187.78	1226.26	1187.08	67,212	-2.53%	3.3%	-10.85%
2013.12.20	1202.73	1207.40	1188.73	51,841	1.26%	1.6%	-9.28%
Forecast: +1 Trading Day 22-12-2013							-9.32%
Forecast: +2 Trading Days 23-12-2013							-8.94%
Forecast: +3 Trading Days							-8.13%
Forecast: +4 Trading Days							-6.44%
Forecast: +5 Trading Days							-7.04%
Forecast: +6 Trading Days							-6.17%
Forecast: +7 Trading Days							-5.06%
Forecast: +8 Trading Days							-5.87%
Forecast: +9 Trading Days							-6.70%
Forecast: +10 Trading Days							-5.49%

 

■ George Protonotarios, Financial Analyst

Free Trading Signals: Gold Price Outlook as 2013 Ends

Trading Center.org (21st, December 2013)