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Why Gold Will Drop Below $1000 In 2017

By Taki TsaklanosCommoditiesNov 13, 2016 12:40AM ET
www.investing.com/analysis/the-future-price-of-gold-will-drop-below-$1000-in-2017-200164294
Why Gold Will Drop Below $1000 In 2017
By Taki Tsaklanos   |  Nov 13, 2016 12:40AM ET
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As the price of gold and silver came down sharply, many investors are asking what the future price of gold will be. Although we do not pretend to have a crystal ball, we observe sufficient signals in the charts to make a make a call about the future price of gold into 2017.

In general, the precious metals market has turned very sour. Gold registered it largest loss on a weekly basis since it crashed in 2013. Moreover, gold and silver miners, said to lead the precious metals complex, have truly crashed this past week.

Still, mainstream thoughts, which we consider a barometer for sentiment, remain very moderate. That should be considered a bearish sign. These are some of Friday's headlines of today, as gold lost more than 5 percent in two days, silver almost 15 percent in two days and precious metals miners even more than 15 percent:

The only analysis that is truly bearish appeared on Seeking Alpha, where the future price of gold was forecasted to drop below $1000. Though that article was not written by ourselves, we come to the same conclusion when analyzing price behavior and sentiment. And it surely confirms our proper gold price forecast for 2017.

Future price of gold points to $1000/oz as the most likely 2017 forecast

The gold chart sent a clear signal this week. As seen on the first chart, gold dropped below the important $1250 level. The price of gold clearly returns in the same bearish trend channel which started with the big collapse of April/June of 2013.

With that, we get the ultimate confirmation that gold is still in a longer term bear market, and that it is moving to the lower area of the channel which is below $1,000 /oz.

Gold Weekly 2011-2016
Gold Weekly 2011-2016


Generally speaking, the challenge to understanding gold is that it has two faces. On the one hand, it is an inflationary asset, rising as inflation expectations rise. On the other hand, it is a fear asset, rising when fear enters the market.

Throughout the first 6 months of 2016, markets were driven by fear, which is the reason why gold was rising. However, at a certain point, fear stopped acting as a primary trend, and gold stopped rising. Even if there is some inflation, gold seems to act as a fear asset at this point, and investors should respect that signal.

The yen confirms gold’s price behavior

The Japanese yen is said to be a global risk indicator, similar to gold. In recent weeks, the yen has been falling steadily, after it rose sharply throughout 2015. What can we derive from that? The difficulty is that the weekly 5-year chart does not express any relevant pattern. In such a case, investors should zoom out until a relevant pattern becomes visible.

XJY Weekly 2011-2016
XJY Weekly 2011-2016

When zooming out, we observe an extremely interesting and important fact: the yen stopped rising exactly at major resistance, at the red line on the chart below. It appears that 100 points in the Yen Index has a very high importance. The fact that the yen got so much resistance at that level confirms our conclusion from the gold market.

Yen Index 1994-2016
Yen Index 1994-2016

Warning: High Yield bonds

Though the yen and the price of gold both confirm that the future gold price has a very bearish bias, there is one risk indicator which is not ‘convinced’ at this point, i.e. High Yield bonds (via iShares iBoxx USD High Yield Corporate Bond Fund (NYSE:HYG)). The next chart makes that point. Investors should pay close attention at which point HYG stops falling.

HYG Weekly 2011-2016
HYG Weekly 2011-2016


Conclusion

We would not exclude the possibility that gold would retest its 1980 highs at $850, though we do not expect gold to trade for a long time at that price level (it is more of a worst case scenario). We explained in much more detail how we came to that conclusion in past articles, but, Friday, we got additional confirmation about the validity of that scenario from intermarket dynamics (first and foremost with a falling yen after it hit secular resistance). The High Yield bond market should be watched closely though for the reasons outlined above.

Why Gold Will Drop Below $1000 In 2017
 
Why Gold Will Drop Below $1000 In 2017

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Filip Nowak
Filip Nowak Jun 12, 2017 11:36AM GMT
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Got the same filling it's a bull*t analysis. 0% of fundamentals which are key to understand the gold prices even cuased by manipulations. With the negative interest rates with 0% rates, I'd rather say as below colleagues, it will hit 1500$ than 1000$ looking what value of the dolar is actually being destroyed. .
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Andrzej Szołomicki
Andrzej Szołomicki Jun 10, 2017 6:52AM GMT
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This is not a good analysis. The reason is simple usd already had its maximum ar 102.3. Gold is always influenced by the usd rate, and this is going to fall, so gold is now rising to around 1339. decline of 1220 and again this rise above 1445, here / 1445 / all depends what usd do .Certainly 100% will not see gold at 1000 in 2017year
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CMA Cycles Analysis
CMA Cycles Analysis Jan 27, 2017 7:08AM GMT
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I think in time he will be proven correct. The leg down that started in July 2016 is incomplete. Looking for approx 1097 for a major support level. Ultimate bear low will be sub 1000 IMO. My own analysis suggests the 850-900 range. Just my 2c worth))) Time will tell.......
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Rodrigo Sánchez
Rodrigo Sánchez Jan 24, 2017 7:09AM GMT
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your analysis is totally in an error
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Rodrigo Sánchez
Rodrigo Sánchez Jan 24, 2017 7:02AM GMT
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Completely a crazy your analysis
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Kai London
Kai London Jan 18, 2017 8:46AM GMT
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Actually, Gold will hit $1,500 by end of 2017
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Widyanarto Wibowo
Widyanarto Wibowo Jan 17, 2017 7:33AM GMT
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So where would be the 10yrs US bond??4%?? Stupid analysis!.
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Vishwas Patil
Vishwas Patil Jan 15, 2017 7:59AM GMT
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Useless analysis. Not based on identifying the variables and simulation. Just imagination. Why mislead people? Political ripples on the actually expected Trump win driving China to buy gold in an effort to demean Dollar or making Dollar instead of devaluing Yuan - 100's of different possibilities besides manipulation possibilities considering the mid-term forecasts. Why not spend some time hard studying before writing?
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volcano hardrock
volcano hardrock Jan 13, 2017 4:22AM GMT
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i agree, totally true. its clear with a technical analysis. but main fact is not technic, main fact is that 1 onz gold do not worth 1000 usd. this speculative price built in forex, and will be back to 250s in few years, when people reqognize that 1 onz gold is just a coin.
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volcano hardrock
volcano hardrock Jan 13, 2017 4:30AM GMT
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and i have to add this data, people trade this metal in forex, but most of them do not even know what are they trading, they are mostly just interest in the numbers. for example today 1onz gold is 1200usd, but forex traders do not think what is that price for. they just check the chart and trades with that. they should think what they are buying with 1200 usd. they are buying a coin for 1200usd. and a gram is about 40usd, just a gram. thats very expensive.
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Marty Summers
Marty Summers Jan 10, 2017 11:21PM GMT
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Wrong, Wrong, Wrong!!! We are 1 tweet away from a global currency crisis........
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Jan 10, 2017 9:30PM GMT
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$1000 below in 2017. Overall still in bearish trend which never broke on a monthly level.
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Toan Nguyen
Toan Nguyen Dec 19, 2016 3:49AM GMT
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Jesus christ, Gold is 1140 now.
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Jose Frajtag
Jose Frajtag Dec 01, 2016 10:18AM GMT
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The precious metals mkt are heavily distorted, Compared to any other, like silver, palladium or platinum, gold looks very expensive! So something is going to happen, or those metal prices are going to climb around 20% or gold have to fall 20%. I always bet in the middle, like gold falling 10% and those metals climbing 10%!
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Jeffrey Vose
Jeffrey Vose Nov 16, 2016 6:59PM GMT
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When Obama and Trump met up at the White House the other day... I wonder how long it took for Trump to say "So Barrack... Where's that red button?".
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Christopher Bergner
Bugsy_South_UK Nov 15, 2016 1:58PM GMT
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Trump is just another puppet and like Obama most of the changes will never occur. Spending a Trillion on infrastructure may sound prosperous, but the money has to be printed to cover the costs, which may spiral out of control. This will in reality devalue the Dollar considerably and raise the debt levels to newer even less sustainable highs. Sadly Trump is just the new Captain of the Titanic which is already 3/4 under water! Collapse is coming and no one can stop it.
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Joice Juice
Juice Nov 15, 2016 3:31PM GMT
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True and its very sad
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Edgar Ivan Sanchez Morales
Edgar Ivan Sanchez Morales Nov 15, 2016 7:15PM GMT
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And why does this guy is telling us that gold is devalue asset?
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Mike Jarrow
Mike Jarrow Nov 14, 2016 6:43PM GMT
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trump will bring USA to new peace and prosperity and unite the people within the US and even outside by example. gold will get back to less inflated prices as the world starts to return to sanity.
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Rajesh Sharma
Rajesh Sharma Nov 14, 2016 6:39AM GMT
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Gold will go to new highs.....USA might break .....Mark my words....
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kamal Singh
kamal Singh Nov 14, 2016 1:43AM GMT
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India black money crackdown also negative for gold.
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Investing In
Investing In Nov 14, 2016 1:19AM GMT
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Italy’s Dec. 4 referendum on a constitutional overhaul that could shake up its government and open the door for an exit from the European Union.. Trump didn't even start his crazy policies and he said he wanted to fire Yellen, keep rates low. Brexit expected to be triggered next year...this article is BS
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Karina Fabi
Karina Nov 14, 2016 12:30AM GMT
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Great post..From prices side, the only price area close to 1000 is below 1192. Above it, it will pullback up to 1259 and 1300..Gold is in BEAR area now. .Above 1300 is the only option for buyers...
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Alexander Bjerkvik
Alexander Bjerkvik Nov 14, 2016 12:03AM GMT
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I think gold will form an inverse head and shoulders by 2017. I.e. the current pullback eventually forming the bottom of the right shoulder.
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Robert Ace
Robert Ace Nov 13, 2016 5:32PM GMT
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Dude obviously isn't paying attention to what's going on in India. Modi has banned cash and the rush to gold is on. The price of gold is being suppressed while the elites inflate their equity holdings for a massive sell off conciding with the price of gold spiking. Things are moving from west to east and the east wants gold. Real gold not the paper COMEX/Lbma garbage.
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Christopher Bergner
Bugsy_South_UK Nov 15, 2016 2:06PM GMT
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I agree what we have on COMEX is Paper Gold, or perhaps Fiat-Gold, Digi-gold, Holo-gold? It bears little reality to the actual metal. Trouble is manipulation is clearly rife on many fronts and if everything is being distorted, then everything means nothing? Have can we have stability when everything is warped out of shape?.
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JJ Gold
JJ Gold Nov 13, 2016 2:59PM GMT
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Taki, at what level would the HYG confirm your thesis?
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taki tsaklanos
taki tsaklanos Nov 14, 2016 9:37AM GMT
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hi JJ Gold, good question, I am not focused on a specific price but more on the general trend in HYG. As long as it doesn't really crack down, it is a confirmation. So the overarching chart pattern (constructive vs destructive) is the answer to your question, at least from my perspective.
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Kostas Ntinos
Kostas Ntinos Nov 13, 2016 2:06PM GMT
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Thanks !
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Nov 13, 2016 1:05PM GMT
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1030 not below 1000
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