Bearish XAUUSD - Did Tech/BTC finally kill Gold demand forever?
Trendlines: Two downtrend lines since August are still intact. Longer-term uptrend line broken, price went above but now back below. The bulls just seem powerless.
Support/Resistance: $1676 support.
Moving Averages: Below all major MA’s: EMA 9, SMA 20, 50, 100, 200. Did not include them on the chart as they are trendless and a mess at this point.
Gold is having trouble even getting close to the 2 downtrend lines drawn. Price is spending more and more time at the lows of the 12-18month range. Bulls have no power. Especially now that the market is showing concerns about inflation, where is the demand? If this isn’t gold’s time to shine, then when? Has the fundamental structure of the markets demand for gold changed? Maybe it is no longer the only/best option to hedge inflation.
Miners are hitting lows. Silver broke below a support line ($21.66262) held intact since 2020. Could be a leading indicator of gold finally breaking below $1676 support.
As I stated in my previous analysis, maybe gold just trades like a currency and that’s why we don’t see years of compounding returns as we see in equities. Equities have compounding earnings and return on capital. Gold does not. It is pretty clear the price is making lower highs. Also, when looking at the monthly chart, there is a pretty clear double top. Imagine if there is a slight change in sentiment about inflation, I believe there will be a massive rush for the exits.
Don’t use Bitcoin positive price action as a signal of inflation and demand for a hedge against inflation that might spill over to gold eventually. Bitcoin demand comes from the following:
1) Freedom from central bank intervention
2) An investment in a future payment system
3) Speculative asset
Even though #1 mostly has to do with inflation, it is also about central bank manipulation in general. I think no matter if it's inflation or deflation, the new-gen is tired of central banks deciding when we have a bull or bear market, what interest rates should be and what the price of everything should be. New-gen is catching on that we need price discovery. Inflation or deflation, higher or lower dollar, I think Bitcoin will perform well. Gold is mainly a hedge against a loss in purchasing power which might not come as the dollar is at about 95 and inflation could very likely be transitory. But it is definitely not hyperinflation and you can get much better returns in equities that certainly will outpace inflation and gold. I am not trying to make a case for Bitcoin. I am just saying Bitcoin is attracting demand and not for the same reason as gold which is why you cant use demand for Bitcoin as a justification for eventual Gold demand.
Bitcoin is showing healthy bullish price action and based on #3, I believe equities (mainly tech) will continue to rise. Also, new-gen isnt interested in the "value" "cyclical" stocks that have no future because the writing is on the wall, these tech companies are exponentially changing the world.
But overall, gold looks extremely bearish. The ride higher appears to be over. I would much rather be in equities or Bitcoin rather than gold as a hedge against inflation and I think the structure of the market is catching on to this analysis. Gold will not perform as it has in the past and the market might possibly have changed forever. We could be headed back to $1200-$1400 in the next few years.
Support/Resistance: $1676 support.
Moving Averages: Below all major MA’s: EMA 9, SMA 20, 50, 100, 200. Did not include them on the chart as they are trendless and a mess at this point.
Gold is having trouble even getting close to the 2 downtrend lines drawn. Price is spending more and more time at the lows of the 12-18month range. Bulls have no power. Especially now that the market is showing concerns about inflation, where is the demand? If this isn’t gold’s time to shine, then when? Has the fundamental structure of the markets demand for gold changed? Maybe it is no longer the only/best option to hedge inflation.
Miners are hitting lows. Silver broke below a support line ($21.66262) held intact since 2020. Could be a leading indicator of gold finally breaking below $1676 support.
As I stated in my previous analysis, maybe gold just trades like a currency and that’s why we don’t see years of compounding returns as we see in equities. Equities have compounding earnings and return on capital. Gold does not. It is pretty clear the price is making lower highs. Also, when looking at the monthly chart, there is a pretty clear double top. Imagine if there is a slight change in sentiment about inflation, I believe there will be a massive rush for the exits.
Don’t use Bitcoin positive price action as a signal of inflation and demand for a hedge against inflation that might spill over to gold eventually. Bitcoin demand comes from the following:
1) Freedom from central bank intervention
2) An investment in a future payment system
3) Speculative asset
Even though #1 mostly has to do with inflation, it is also about central bank manipulation in general. I think no matter if it's inflation or deflation, the new-gen is tired of central banks deciding when we have a bull or bear market, what interest rates should be and what the price of everything should be. New-gen is catching on that we need price discovery. Inflation or deflation, higher or lower dollar, I think Bitcoin will perform well. Gold is mainly a hedge against a loss in purchasing power which might not come as the dollar is at about 95 and inflation could very likely be transitory. But it is definitely not hyperinflation and you can get much better returns in equities that certainly will outpace inflation and gold. I am not trying to make a case for Bitcoin. I am just saying Bitcoin is attracting demand and not for the same reason as gold which is why you cant use demand for Bitcoin as a justification for eventual Gold demand.
Bitcoin is showing healthy bullish price action and based on #3, I believe equities (mainly tech) will continue to rise. Also, new-gen isnt interested in the "value" "cyclical" stocks that have no future because the writing is on the wall, these tech companies are exponentially changing the world.
But overall, gold looks extremely bearish. The ride higher appears to be over. I would much rather be in equities or Bitcoin rather than gold as a hedge against inflation and I think the structure of the market is catching on to this analysis. Gold will not perform as it has in the past and the market might possibly have changed forever. We could be headed back to $1200-$1400 in the next few years.