New outlook for the gold price

At the start of October, we speculated on $4,000 gold, also creating a Halloween scenario where the price of gold would exceed $4,000 for a while, then collapse. It is certainly interesting to note the price of the metal exceeded that target level by 10%, then experienced some slight reversals.

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We had certainly expected the $4,000 level to be exceeded and gold indeed bubbled higher, doubtless triggering a shedload of stop-losses for those wise folk who’d opened short positions. It’s not rocket science, the market follows the same rulebook almost regardless of the share, commodity, or even crypto.

Source: Trends and Targets. Past performance is not a guide to future performance.

Of course, the implication behind such an absurd statement is a suggestion the markets may suffer manipulation, rather than follow the vague rules established by our fellow Scottish economist Adam Smith which applied to his theory of supply and demand. The major flaw in Smith's arguments comes from something else blindingly obvious, both sides of his equation are aware of his “laws” and both sides do their utmost to make the “laws of supply and demand” work in their favour.

Currently, with the price of gold, it’s doing its utmost to give the impression some major reductions may be imminent, perhaps due to something perceived as peace in the Middle East reducing tensions, reducing oil prices, reducing the demand for a safe haven for funds. After all, gold is always regarded as the sane “safe haven” and, with panic about financial safety reducing, so should the price of gold.

However, it’s proving a bit obvious from our perspective and, while we suspected a major “gotcha” was going to happen, this initial reduction on the gold price has not been as vivid as expected. As a result, we now suspect a further upward surge may be possible, doubtless utterly confounding all the smart folks holding short positions from the $4,000 level. We smell a rat, along with a strong argument favouring departure from Adam Smith's rules. Above $4,045 now risks triggering an initial $4,258 with our secondary, if bettered, a future $4,384 which naturally challenges the previous two highs.

In other words, should gold make its way to $4,384, opening a Short position with a seriously tight stop should not be the worst decision. In this scenario, we anticipate immediate reversal to $4,045 or so. Our longer-term secondary (or later in the session) works out at $3,815, but we have doubts.

Should we choose to adopt our usual software driven stance, the immediate scenario promises weakness below $3,885 bringing a trip down to an initial $3,816 with our secondary, if broken, at $3,622 and perhaps a bounce.

Gold is behaving a bit weird, perhaps a Halloween thing, but despite our usual expectation of reversal, we think it will confound the market and head upward first!

Source: Trends and Targets. Past performance is not a guide to future performance.