This gold price forecast analysis was written on October 3d last year, and was updated in December and in April 2017.
Gold was hot in the first 6 months of this year. Hardly anyone predicted the monster rally we saw in 2016. And, as it always goes, right at a time that everyone got overly excited, gold prices stalled and did go nowhere since then. Consequently, around summer time, there was a consensus around a bullish gold price forecast for 2017.
The excitement around the summer of this year was striking, as suggested by the non-stop bullish media coverage. We highlight a couple of the articles that appeared right at a time when the price of gold was in the process of peaking:
- Credit Suisse Sees $1,500/Oz Gold By Early 2017 published by Kitco on June 30
- RBC Calling For $1,500 Gold For 2017, 2018 published by Kitco on July 15
- Is Gold Set To Hit $1,500 Per Ounce? published by Forbes on July 21
- Gold Bull McEwen Sees Prices as High as $1,900 by End of Year by Bloomberg on September 20
As always, we prefer to stick to the facts which we derive from chart developments as well as sentiment analysis and intermarket dynamics. We see a concerning trend developing on the gold chart. The green circles on below chart highlight the rare periods of price stabilization. Gold is a volatile asset, so it does not happen often that prices stabilize. In December of 2015, the price of gold stabilized which was an indicator that a reversal was brewing. Right now, we see the same happening. Both happened right a major support and resistance. If you are interested in short-term gold trading, read the following analysis for some perspective and unexpected tips.
How to determine a gold price forecast for 2017
Price analysis suggest that the gold price forecast for 2017 is bearish.
Our expectation is much closer to what this article said in May I See Gold Correction In 2017. Hence, it is not as bullish as the articles highlighted above.
Where do we see the price of gold going in 2017? We start sensing that gold will continue to as a “fear asset” in 2017. Given that stock markets, which we consider an important risk indicator, are becoming very bullish, as suggested in” S&P 500 Suggests Much Higher Prices Coming in 2016 and 2017″, gold could take a hit as fear is moving away from markets. In the early days of 2016, markets were driven by fear, which is the reason gold rallied so strongly, but that has changed recently.
With that in mind, we see gold moving towards the lower area of its bearish trend channel. Right now, support comes in around 990 USD. By the second half of 2017, that will be around 890 USD, which is exactly the peak of 1980.
In other words, we do not exclude the scenario in which the gold price will hit 890 USD in 2017 after which it will turn around and evolve into a new and strong bull market.
New update on our 2017 gold price forecast
*** Update end December ***
After the U.S. Fed’s decision to increase interest rates, we updated our readers on gold’s trend. Basically, the reaction of the market on the Fed’s decision is only accelerating gold’s sell off, and confirming our gold price forecast. The chart most actual gold chart below to shows how gold fell into its former falling trend channel in October). It seems sufficiently clear that gold is now moving to the lower area of that channel, which is below $1000. In other words, today’s sell off in gold simply confirms the ongoing down trend in the 5-year bear market.
Moreover, as said before, we believe gold is the leading indicator in the precious metals complex. Gold is nowhere near an important support level at this point. We add gold’s long term price chart with annotations we haven’t shared before. It’s the first time we reveal this gold chart which we consider the most important one in our long chart list. We show the falling trend channels on this chart, visible in both bear markets after the 1980 peak. Gold tends to move in clear and concise channels during a bear market. Although the center of a channel can potentially provide support, it is much more likely that the lower area of the channel will be the key support area.
This long term chart shows the first support target below $1000 and the second around $850.
*** Update end of April 2017 ***
After our December update, gold bounced back and went higher with the upper area of the falling channel. However, that rally did not reach too high, as gold’s rally stalled at $1300 at the end of April. That is truly bearish, similar to last summer, as gold did manage to come closer to the highest resistance trend line of its secular bear market. It implies that our bearish gold price forecast for 2017 is likely to materialize later this year.
A closer look on the weekly chart, over 5 years, makes our point. Watch how the latest rally stalled more than $50 below the highest trend line. Gold bulls want to see a break above that trend line in order for gold to turn its bear market into a bull market.
If $1200 does not hold, chances are high that gold will fall to $1050 during the summer, and, worst case, to $900 before making a final bottom.
Our gold price forecast for 2017 remains valid until proven otherwise.