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Why Gold Prices Could Go Much Lower

Published 05/30/2016, 04:17 PM
Updated 07/09/2023, 06:31 AM

DOWNTREND CHANNEL


In early April, Gold Shares prices attempted to break above the Downtrend Channel (see red circle), if succeeded, that would've been the start of something.

But with failed breakout comes fast move to the opposite direction as we can see in the chart below.

To make things even worse for the buyers, we have formed 'bearish divergence' on the MACD oscillator I have included on the chart.

This is like spraying gas in the fire. If the price starts to decline below $115, I think the price could continue to deteriorate; in the worst case scenario, all the way back down to the bottom of the channel support at $100-95ish. GLD Daily Chart

OVERBOUGHT STATUS


Looking at the weekly-chart below, we can see that the price is now falling after hitting the "overbought" status level.

Again, to make things worse, we have formed another bearish divergence on the Stochastics Oscillator shown below.

Weekly-scale divergences are actually more potent that the daily-chart above; but when they form together (daily and weekly) like this, it could be disastrous.

If we don't see buyers reclaiming the price above $120 in the next couple weeks, I think the sellers are preparing to have a party for months on Gold Shares (NYSE:GLD).
GLD Weekly Chart

Latest comments

"Gold Shares (NYSE:GLD)". . Speaking of GLD, why is there a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create this massive audit loophole? I haven't heard of a single good reason for the existence of this loophole so far. In addition to the audit loophole, GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion.. . I remember CNBC's Bob Pisani visiting GLD's vault in a well documented segment. GLD's administration arranged this visit to disprove everyone claiming that GLD's gold did not exist. However, Mr. Pisani held up a gold bar with the following serial number - ZJ6752. This serial number did not appear on the most recent bar list during that time period. Cheviot Asset Management’s Ned Naylor-Leyland later found out that this "GLD" bar actually belonged to ETF Securities.
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