Forecasting

Gold price 'to average $1,220 in 2014'

Some analysts expect price to fall below $1,000, while others are much more bullish

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The gold price will average $1,219 an ounce this year, according to a survey of analysts.

The analysts expect the gold price to range between $1,067 and $1,379 this year, a report compiled by the London Bullion Market Association (LBMA) found.

Yesterday's gold price according to the LBMA's afternoon London "fixing" was $1,248.

Gold ended 2013 at $1,202, 28pc lower than at the beginning of the year, bringing to an end 12 consecutive years of price growth.

The most optimistic prediction for the gold price this year came from Martin Murenbeeld of Dundee Capital Markets in Canada, who said the price could go as high as $1,550, although he put the bottom of its possible price range at just $1,075.

"With every central bank in developed economies hoping to boost inflation, there is sufficient room to speculate that the gold market will make a turn in 2014 and end the year higher than where it started," Mr Murenbeeld said. But he added: "The US dollar is likely to remain a headwind for gold in 2014."

Gold often moves in the opposite direction to the US currency, which is expected to strengthen as the Federal Reserve slows its money-printing policy of QE.

At the other end of the scale, three analysts said the price could fall as low as $950. One, Robin Bhar of Société Générale in London, said gold investors were "likely to remain big net sellers over the coming months and quarters".

The analysts who contributed to the report cited the possible strengthening in the US dollar, the reining in of QE, weak global inflationary pressures, oversupply of gold and further sales by investors who hold gold in exchange-traded funds or ETFs as factors that could restrain gold prices.

"But the price could be supported by continued strong demand from China, a relaxation in India’s import duties as well as the prospect that low prices could constrain mine output and supply of scrap," the report added. "So an increase in price cannot be ruled out particularly if such “positive” influences take centre stage."

Investors should treat the forecasts with caution, however – the predictions about last year's gold price were far too optimistic. The average analyst's prediction for the gold price in 2013 was $1,753, but the average actual price last year was just $1,411 – almost 20pc lower.

Separately, analysts at Morgan Stanley cut their gold price forecasts for 2014 by 12pc to $1,160.

People who invested in gold via funds suffered big losses last year. The popular BlackRock Gold & General and Way Charteris Gold Portfolio Elite funds lost half of savers’ money, while the Junior Gold fund declined by 65pc – the worst performance of the 1,500 funds available to British savers.

HOW TO INVEST IN GOLD

Gold Bars

Bars come in metric sizes, and are based directly on that day's gold price, plus a premium for manufacture and marketing. The smaller the bar, the bigger the premium.

Gold coins

Twenty-two carat gold sovereigns the favourite of British investors. Sovereigns dating from about 1887 and up to 1982 are currently considered the best investment. Bullion coins recognised as UK legal tender are exempt from capital gains tax.
Another coin option is to buy South African Krugerrands. The smallest is a 0.1oz coin, which costs about £125 at the time of writing.
The specialist website MoneyWeek has a directory of bar and coin dealers.

Exchange-traded funds

ETFs are funds, traded on a stock exchange like shares, that allow investors to track the performance of particular indices or a commodity, providing the investor with the same returns as this underlying market.
ETFs are available for gold, silver, platinum and palladium. ETFs can be traded daily – all you pay is the dealing charge of around 0.4pc, or £7 per trade. ETFs are increasingly the most popular method of gold investment.

Some hold physical gold while others depend on financial instruments such as derivatives. The former, seen as safer, are offered by companies such as iShares and EFT Securities.

Gold accounts

Gold bullion banks offer two types of gold account – allocated and unallocated. An allocated account is effectively like keeping gold in a safety deposit box and is the most secure form of investment in physical gold. The gold is stored in a vault owned and managed by a recognised bullion dealer or depository.

With an unallocated account, on the other hand, investors do not have specific bars allotted to them. Traditionally, one advantage of unallocated accounts has been the absence of storage or insurance charges, because the bank reserves the right to lease the gold out.

Shares and funds

You can of course buy individual shares of companies that either trade or mine gold. Several funds, such as BlackRock Gold & General, aim to pick the best of these shares.

Just a forecasting for GOLD (XAUUSD) D1 timeframe using WmiFor indicator :

Talking Points:

• Must You Know What Will Happen Next?
• Is There a Better Way?
• Strategies When You Know That You Don’t Know

“Good investing is a peculiar balance between the conviction to follow your ideas and the flexibility to recognize when you have made a mistake.”
-Michael Steinhardt

"95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears"
-Mark Douglas, Trading In the Zone

Many traders become enamored with the idea of forecasting. The need for forecasting seems to be inherent to successful trading. After all, you reason, I must know what will happen next in order to make money, right? Thankfully, that’s not right and this article will break down how you can trade well without knowing what will happen next.


Must You Know What Will Happen Next?

While knowing what would happen next would be helpful, no one can know for sure. The reason that insider trading is a crime that is often tested in equity markets can help you see that some traders are so desperate to know the future that their willing to cheat and pay a stiff fine when caught. In short, it’s dangerous to think in terms of a certain future when your money is on the line and best to think of edges over certainties when taking a trade.



The problem with thinking that you must know what the future holds for your trade, is that when something adverse happens to your trade from your expectations, fear sets in. Fear in and of itself isn’t bad. However, most traders with their money on the line, will often freeze and fail to close out the trade.

If you don’t need to know what will happen next, what do you need? The list is surprisingly short and simple but what’s more important is that you don’t think you know what will happen because if you do, you’ll likely overleverage and downplay the risks which are ever-present in the world of trading.

• A Clean Edge That You’re Comfortable Entering A Trade On
• A Well Defined Invalidation Point Where Your Trade Set-Up No Longer
• A Potential Reversal Entry Point
• An Appropriate Trade Size / Money Management

Is There a Better Way?

Yesterday, the European Central Bank decided to cut their refi rate and deposit rate. Many traders went into this meeting short, yet EURUSD covered ~250% of its daily ATR range and closed near the highs, indicating EURUSD strength. Simply put, the outcome was outside of most trader’s realm of possibility and if you went short and were struck by fear, you likely did not close out that short and were another “victim of the market”, which is another way of saying a victim of your own fears of losing.




So what is the better way? Believe it or not, it’s to approach the market, understanding how emotional markets can be and that it is best not to get tied up in the direction the market “has to go”. Many traders will hold on to a losing trade, not to the benefit of their account, but rather to protect their ego. Of course, the better path to trading is to focus on protecting your account equity and leaving your ego at the door of your trading room so that it does not affect your trading negatively.

Strategies When You Know That You Don’t Know

There is one commonality with traders who can trade without fear. They build losing trades into their approach. It’s similar to a gambit in chess and it takes away the edge and strong-hold that fear has on many traders. For those non-chess players, a gambit is a play in which you sacrifice a low-value piece, like a pawn, for the sake of gaining an advantage. In trading, the gambit could be your first trade that allows you to get a better taste of the edge you’re sensing at the moment the trade is entered.



James Stanley’s USD Hedge is a great example of a strategy that works under the assumption that one trade will be a loser. What’s the significance of this? It pre-assumes the loss and will allow you to trade without the fear that plagues so many traders. Another tool that you can use to help you define if the trend is staying in your favor or going against you is a fractal.

If you look outside of the world of trading and chess, there are other businesses that presume a loss and therefore are able to act with a clear head when a loss comes. Those businesses are casinos and insurance companies. Both of these businesses presume a loss and work only in line with a calculated risk, they operate free of fear and you can as well if you presume small losses as part of your strategy.

Another great Mark Douglas quote:
“The less I cared about whether or not I was wrong, the clearer things became, making it much easier to move in and out of positions, cutting my losses short to make myself mentally available to take the next opportunity.” -Mark Douglas

Happy Trading!
---Written by Tyler Yell, Trading Instructor

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Excel: GOLD Forecast Indicator using BB and MA

Dollar Forecasts for 2014 and 2015: EURUSD And GBPUSD Exchange Rate Falls Predicted

The US dollar (USD) is forecast to retain a solid footing through the remainder of 2014 and into 2015 suggest the majority of analysts we follow.

The 2014 dollar rally had long been predicted, however a poor winter in the United States saw the currency falter in the first half of the year putting paid to these predictions.

After a decent summer of gains we ask whether the USD is about to restart its stalled longer-term climb again?
For your reference, here are the latest spot rates at the time of this article's latest update:

• The pound dollar exchange rate is 0.66 pct lower on a daily comparison at 1.6618.
• The euro dollar exchange rate is 0.35 pct lower at 1.3317.

Martin Schwerdtfeger at TD Securities tells us why he is predicting a stronger USD: "Our G10 FX forecasts are largely unchanged this month. Our baseline view of a stronger dollar on improving US data is gaining support and is expected to remain a key theme in the year ahead. However, while for now we maintain our end 2014 targets for GBP/USD (1.68) and EUR/USD (1.32), downside risks are more evident."

"Rapidly improving economic fundamentals are likely to help US growth performance lead the G7 pack as Japan and the Eurozone lag, allowing the Fed to begin paring back monetary policy sooner," say TD Securities in the their latest analysis of the US economy.

As we see from M5 chart below - the uptrend is started after correction finished - the price was stopped by 44.97 resistance.

• if the price will break 44.97 resistance level on close M5 bar so the primary bullish will be continuing (good to open buy trade)
• if not so we may see the secondary ranging or correction inside the primary bullish

Resistance	Support
44.97	44.76
n/a	44.65

Near-term, Deutsche Bank thinks that the recent pause in EUR/USD drop could extend into year-end with market positioning very extended, real yield fair value still in the high 1.20s, and ECB expectations running ahead of what was delivered at its December meeting last Thursday.

Going out to next year, DB sees more downside to the currency with the risks being skewed to greater, rather than lesser weakness. DB outlines 3 reasons behind this view:

• First, ECB QE remains our baseline most likely delivered in January. The intended effects are likely to be larger and more protracted than equivalently-sized policies in the US or Japan due to the presence of negative rates.
• Second, we expect Fed rate lift-off to materialize over the course of H2, with the dollar historically showing a strong appreciating trend into the first central bank rate hike.
• Finally, we believe next year will mark the beginning of broader capital flow shifts into the US fuelled by persistent growth and increasing monetary policy divergence.

In line with this view, DB targets EUR/USD in 2015 at 1.22 for Q1, 1.20 for Q2, 1.18 for Q3, and 1.15 for Q4.


the source

Cheap Oil: Too Much Of A Good Thing?

The 40% drop in oil prices over the past 6 months has garnered a lot of attention recently, most of it focused on the economic stimulus lower oil prices should provide the global economy, the impact on currency and fixed-income markets and the increase in economic pain suffered by exporters such as Iran and Russia. In this article, I draw on historical data to assess the potential increase in geopolitical tail risk that lower oil prices may represent. I believe this is an overlooked consequence of lower oil prices that, while low probability, would have an outsize impact on the global economy - a classic "fattening of the tail". I look at monthly and aggregate data to smooth out daily fluctuations and avoid having us mistake the forest for the trees.

The data shows that in the 1980s, the most-cited oil price war, the average price of oil dropped from approximately $28/barrel in 1985 to a low of $11.58/barrel in July 1986 (US Energy Information Administration data for monthly average front month futures contract price). This would be analogous to a drop from $60/barrel to $25/barrel in 2014 prices, using the US Bureau of Labor Statistics CPI calculator. Prices subsequently rebounded almost 60% from that July 1986 low, ranging between $16/barrel and $20/barrel for the rest of the 1980s. (There were a few months in that 4 year timespan where the average dropped below $15/barrel, but I want to focus on the big picture in this article.) Inflation-adjusted to 2014 price levels, oil prices ranged between $29/barrel and $37/barrel.

Then something dramatic happened. Between July 1990 and October 1990, prices nearly doubled from approximately $18.50/barrel to $36/barrel. You have probably deduced by now that this was when Iraq invaded Kuwait. For the next 3 years, $20/barrel went from being a ceiling for oil prices to being a floor. Subsequently, prices dropped in the rest of the 1990s until doubling and then tripling in the 2000s for reasons that are beyond the scope of this article.

Fast forward 25 years and we are again seemingly in the middle of a price war with no bottom in sight. This time, though, it may indeed be different. It would be foolish to assume the Russians do not remember the impact of the 1980s oil price collapse on the Soviet Union, then one of the largest producers in the world. At over 10 million barrels per day, Russia today rivals Saudi Arabia in terms of production, with each country representing approximately 10% of global supply. Iranian oil exports, which had only just begun to recover thanks to the loosening of sanctions, are now being hit by lower prices. At 2+ million bpd of exports, a $40/barrel drop in price means Iran is "losing" over $25 billion/year in badly-needed revenue. This is not small potatoes for a country whose GDP the World Bank estimated was only $366 billion in 2013.

Note that both Russia and Iran have shown a willingness to act unilaterally at great cost. From annexing Crimea to visibly increasing bomber patrols in Northern Europe and the US Gulf Coast, the Russians have proven they are no wilting flowers. Indeed, some would say they rely on European dependence on Russian natural gas to get their way. The Iranians have consistently refused to actually dismantle existing nuclear facilities. There has been a great deal of talk about talking, but centrifuges continue to spin.

It does not take a rocket scientist to deduce that any increase in geopolitical instability which increases the price of oil benefits Russia and Iran. It is worth pondering the implications of that statement. I am emphatically not stating that the two countries will act irresponsibly to raise the price of oil. I am just pointing out that, for both countries, lower oil prices may have subtly shifted their calculus and their thinking around the risk-reward of their actions.

We do not need to ascribe nefarious intentions to large oil producers to understand how low prices can have significant geopolitical impacts. Smaller producers such as Venezuela and Nigeria, battling social instability at home, are being hit hard too. As much as the two countries may seem removed from mainstream Western consciousness, the world does not need a new source of volatility in Latin America or increased volatility in a West African region already grappling with Islamic militancy. Lower oil revenues do not help the Nigerian army, guardians of millions of barrels per day of light sweet oil, to procure weapons and train troops to combat secessionists and Islamic militants.

Of course, prices may drop another $30/barrel. The broader point of this article is that lower oil prices have potentially "fattened the tail" by altering probabilities, risk-reward calculations and, as the global economy adjusts to lower prices, the impact of an increase in the price of oil from here. Wearing my trading and portfolio management hat, I personally would not buy oil futures or even outright buy long-dated calls. The probabilities, in my mind, are not high enough to justify the potential losses. But I have begun looking at low-cost, high-payoff options structures such as vertical call spreads and butterflies to see if they make sense as tail hedges in a potentially more geopolitically volatile world. Note that these are not trading recommendations in any way, shape or form. Just a way of articulating my thoughts.

So, is cheap oil too much of a good thing? In terms of raw numbers, it is a very good thing. In terms of fat tails, perhaps not.



the source

So with the advent of global QE, and zero interest rates, have central banks unlocked the key to perpetual bull markets? Let’s just say, I doubt it.

They have managed to stretch some of the multi-year cycles, and hold off the bear much longer than most have anticipated, but I don’t think they have discovered the secret to infinite prosperity.

As I said, the implementation of global QE has stretched some of the longer term cycles, and that is the first thing I’m going to explore in this article. Prior to 2000 there was a very clear four year cycle in the stock market. Roughly every four years stocks would move down into an exceptionally vicious decline, usually associated with either a recession, or some kind of financial debacle.

After 2002 central banks, in their hubris, decided that they could abort the normal business cycle by adjusting interest rates to zero and printing an infinite amount of currency units. At that point the four year cycle in the stock market morphed and evolved into a 7 year cycle.

As you can see in the next chart, it’s getting very late in this seven year cycle, so we can probably expect the top sometime this year.

From this point on I’m going to convert to the chart of the NASDAQ as technology is driving this bull market, and the chart of the NASDAQ will tell us when to expect the top.

For more than a year now I’ve been saying that this bull market would not end until the NASDAQ at least retested the March 2000 highs at 5132. The perma bears that have been trying to call a top for years just don’t understand how major bull markets top. They almost always top on a breakout. Take the top in 2007 for instance. Notice how the market initially tested the 2000 high in the summer of 2007, and then printed a final top on a marginal break out above the old high (major bottoms also form in this pattern).

The big money institutions manufacture these topping and bottoming patterns as it gives them a breakout to sell into at a major top, and a breakdown to buy at a major bottom. Understanding how big money constructs tops and bottoms is critical in preparing for the next bear market.

Given the fact that we are now six years into this bull market with the expectation for one of those seven year cycle lows sometime in the spring or summer of next year, then we can look at a chart of the NASDAQ and come up with a game plan for exiting this bull market. I’m guessing sometime over the next 2-4 weeks we’re going to get that retest of the all time highs, or at the very least, a retest of 5000. To be followed by a sharp intermediate degree decline.

The bottom of the next intermediate cycle low in May or June is probably going to be the last great buying opportunity on the long side until 2016 (there is a lower probability scenario where the market just continues down into that intermediate cycle low over the next 2-3 weeks). As stocks come out of that yearly cycle low sometime this summer, this will be the period where the big-money banks manufacture a breakout to sell their positions in preparation for the move down into that seven year cycle low next year (economic conditions are already starting to weaken). We want to ride on their coattails for this last move back up, and then hop off the train before it goes over the cliff and the market starts down into its seven year cycle low sometime next fall.

At this point it’s too late in the seven year cycle to expect a sustained breakout above the all-time highs, so I think we should assume that that major resistance level is likely going to cap this bull market.

Now what can we expect at a seven year cycle low you ask? I think I can say with a fair bit of confidence that the S&P will break the multiyear trend line, and likely retest the 2000 & 2007 highs. The bears will be calling for the end of the world, and a move back down below 666 by this time.

the source

I just used nearest_neighbor_-_weighted_corr indicator from this post to understand about where EURUSD will go to the future.