Gold Market Update 1-1-2015

Gold Market Update 1-1-2015

Bullion.Directory precious metals analysis 1 January, 2015
By Terry Kinder
Investor, Technical Analyst

Sometimes it doesn’t pay to reinvent the wheel. That’s why, when I ran across this excellent gold market update by Jordan Roy-Byrne of The Daily Gold, it just made sense to use it as a base to summarize where the gold market is as 2015 kicks off.

Summary of Jordan Roy-Bryne’s Gold Market Update:

1. The resurgent dollar isn’t news to anyone who is even an occassional consumer of financial media. The U.S. Dollar has surged from $78.90 in May of 2013 to finish the year at $90.29. Jordan Roy-Byrne, in his gold market update, believes the dollar could continue higher to the $92.00 – $93.00 level before meeting resistance. Sunshine Profits points to $90.19 as a key level, which if pierced could see the dollar move up to $92.00, or even $96.11. Other key currencies to watch are the euro and yen. Both are near key support levels – the euro support is below €1.20, near €1.19, while the yen finds support around ¥79.00 to ¥80.00. In a recent post we highlighted $90.35 as a critical level for the U.S. Dollar which is pretty close to the $90.19 level highlighted by Sunshine Profits, so it’s probably a level worth keeping an eye on.

Gold Market Update 1-1-15: A surging U.S. Dollar since May has exerted downward pressure on the gold price.

2. Another important aspect of this gold market update is sentiment, which has been so low that it seems nothing short of anti-depressants or a higher gold price will keep it from being down in the dumps. The put-call raio on the GDXJ has reached extreme levels as the junior gold mining stocks have bounced off an assumed bottom during the summer of 2013, December of 2013 and then in late May to early June of 2014. The last two bounces off the lows for the junior gold miners saw approximately 60% and 40% advances respectively before they sputtered out again. The sentiment for the larger gold miners hasn’t been much better as measured by Sentiment Trader’s Optimism Index (OPTIX).

OPTIX consists of:

A. Put-Call ratio;
B. Volatility;
C. How ETF trades against net asset value (NAV)

Currently the Optimism Index rests near at least 7-8 year lows. This is the kind of poor sentiment that often occurs as mining stocks near a bottom and rebound higher.

Gold Market Update 1-1-15: As we say our last goodbyes to 2014, a rising U.S. Dollar is something to watch for in 2015 as it was in the last half of 2014.

3. The final pieces of the gold market update puzzle are the Gold-SPX ratio and Silver-Gold ratio. Neither of these important ratios have been able to break out of clear downtrends. Silver, in relation to gold, has been extremely weak in its price action. Weak silver rallies equal bear market rallies. Until silver can begin to outperform gold it will be difficult to for a new bull market to start or be confirmed. The Gold-SPX and Silver-Gold ratios ought to provide a signal that the gold market is transitioning from bear to bull.

As we say our final goodbyes to 2014 and begin 2015, the dollar will remain key. Should it manage to pierce through and hold the key $90.35 level, it could move up to $92.00 or even $96.00, which will likely exert downward pressure on the gold price. Stay tuned for more in a future gold market update.

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