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The Banks Are in Control

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There are two primary scenarios that I’m seeing right now. Both ultimately resolve to the downside. The first is that Gold rallies from here to the resistance zone between 1920-1960 before falling again. The second is that we take the direct route down to lower lows by taking out support at 1675. With the Bullion Banks now clearly in control, I’m leaning towards the latter.

As forecast, the Bullion Banks capped the nascent rise in Gold last week at 1837 and then sent it packing down to 1785 as I type. Until we see stocks fall and/or the Federal Reserve increase their monthly QE, coupled with new fiscal stimulus, the ball is in the court of the Banks.

Gold chart analysis

A break of 1675 would open up a possible drop to the 1500s or, on a worst-case basis, the 1400s before we bottom out.

The resurgent DXY is not helping matters either. 91.78 was tested again on the downside and held for the third time. 

US dollar

Given that the Commercials continue to increase their short dollar position and we have not reached an extreme peak yet, the DXY is more likely to rally to new highs next. 

DXY

My primary target on the upside is 96.50. Such a move would continue to weigh on metals and miners.

As for miners, there is a trapdoor below 30.68 in GDX. Should we break down, we could see a drop of 20-30% to ~20 on a worst-case basis.

GDX

Please keep in mind that whatever the lows turn out to be, I am expecting new highs to follow. Much like the rallies that followed equally depressed lows at 1045 in December 2015, 1124 in December 2016, and 1167 in August 2018. This time around it would be north of 2089 in Gold and over 50 in GDX. 

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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