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Important Longer-Term Trends Continue to Play Out for Gold

By Jim Wyckoff of Kitco News
Tuesday October 14, 2014 10:57 AM

(Kitco News) - As the Kitco News team celebrates five years of providing unique and insightful news and analysis to its valued readers, a few dominant “macro” price themes have played out the past five years, and continue to play out in the market place today. A brief examination of two of these major longer-term price themes follows.

Gold: Big Uptrend followed by Big Downtrend

Late-2008 kicked off a longer-term price uptrend in Comex gold futures that saw prices move from $718.00 an ounce in October of 2008 to an all-time record high just three years later--at $1,923.70 an ounce in September of 2011.  Just a few months later the longer-term price uptrend was negated and a major downtrend was under way on the monthly gold chart.

A long-term look at gold prices. Click to enlarge

In June of 2013 nearby gold futures prices sunk to a three-year low of $1,179.40. Since that time, gold prices have traded in a sideways and choppy fashion on the longer-term monthly chart, with the bears maintaining the overall longer-term technical advantage as the price downtrend remains in place.

The gold market bulls have just recently been encouraged as prices fell perilously close to the major chart support level at the 2013 low, and then made a solid bounce higher. If nearby gold futures prices can in the coming weeks hold above that key 2013 low of $1,179.30, then evidence will build that a market low is in place. But make no mistake, the gold market bulls have heavy lifting to do in the coming weeks and months, to negate the longer-term price downtrend on the monthly chart, and to suggest a longer-term price uptrend can be sustained. It will take a push in nearby gold futures prices above major psychological resistance at the $1,400.00 level to give the bulls longer-term technical strength to suggest prices can then sustain a longer-term uptrend.

Raw Commodity Sector Presently in a Major Cyclical Slump

Veteran market watchers know historical charts clearly show raw commodity markets and the raw commodity sector go through “boom” and “bust” cycles that are very pronounced. An examination of the monthly chart for the Goldman Sachs Commodity Index (GSCI) reveals the raw commodity sector has been in a downward price trend for the past 3.5 years.

A long-term look at the commodity sector. Click to enlarge

The downtrend in raw commodities, in general, has generated more and more media coverage just the past few months. That’s a sign the “bust” cycle for the sector has probably just about run its course. There are also a few raw commodity markets that are showing near-term bottoming signs, or are in outright price uptrends, to also suggest the raw commodity sector may be turning. See on the monthly GSCI chart that there is strong technical support at the 2012 low. If that support level can hold in the coming weeks or few months, such would be a technical clue the index has put in a cyclical low.

But even if there is general raw commodity price weakness for several more months, or longer, the bust cycle will end and then a boom cycle will begin. This is a historical fact. It’s also a historical fact that during the worst periods of cyclical downturns in raw commodities, that is when the best longer-term value-buying opportunities occur. It’s likely that presently several major raw commodity markets are “value buys” that will last for several years to come.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com
Follow me on Twitter @jimwyckoff



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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