Annual VC PMI Supply And Demand Report For Gold: Is 1111 To 1336 The Trading Range For 2019?

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Includes: GOLD, GOLDX, IGLD
by: Scot Macdonald

Summary

After setting a new low in December 2017, gold rocketed up to reach the target anticipated in last year's annual VC PMI report of $1386 to $1384.

The VC PMI sees the current trend momentum for gold for the next 12 months as bearish.

However,if gold closes above $1251 that would negate the bearish trend signal and it would activate on a second close above $1251 the sell 1 (S1) level above the mean.

Because it has closed below the average price of $1251, gold has activated the buy 1 (B1) level down to $1111 to $1026 as we come into the next360-day cycle.

2017-2018 Report

In an interview today, Patrick Montes DeOca, founder and CEO of the Equity Management Academy, discussed the Variable Changing Price Momentum Indicator (VC PMI) supply and demand annual report that we published on Seeking Alpha on October 10, 2017. In the report, we looked at the long-term gold forecast for 2017-2018, analyzing the 360-day cycle as we moved from September 28, 2017 through to September 28, 2018.

On September 28, 2017 gold closed at around $1288, above the 50-day moving average of $1253. Since gold closed above the 50-day moving average, we came into the cycle period of the past 12 months with a bullish uptrend.

The report also gave us the yearly moving average price, which was at about $1263. Since the market closed at $1288, it indicated that the next 360-day cycle was bullish and the VC PMI forecast the average price for the next 12 months to be $1264. Since the market closed above the average price, it indicated that the gold market was bullish for the next 12 months.

In the September 2017 report, we wrote “a price above $1264 is bullish, which automatically identifies the extreme of the supply and demand for next year. The extremes of the supply levels are at $1386 to $1484. The yearly trend is bullish and the average price is $1264 for next year, which also identifies the extreme above the mean. You can use the extremes above the mean as your targets, which are $1386 to $1384, which are the sell 1 (S1) and sell 2 (S2) levels. We recommend easing out of long positions at the S1 and S2 levels as you take profits off the table.”

How Did We Do?

In my discussion with MontesDeOca, we looked at the charts to see what happened after the report was published. The gold market on September 28, 2017 closed around $1288. It came down into December to a low of about $1236.50. Then from December 2017 it rallied sharply into January 2018, breaking through the high that was established at $1392.30, and basically, the target that was published in the Sept 28, 2017 report was completed at $1386. In the report, we recommended to take profits at $1386 to $1384.

Additionally, we told you that if the market came down, “It is clear that $1264 is a level that you want to watch. If the price comes down to $1264, then the market momentum changes from bullish to neutral. If that happens, you should cover any bearish positions, if you’ve taken any, since the sentiment will change to levels of $1166 to $1044. A second confirmation of trading below $1264 will activate buy signals at $1166 and $1044.”

We stated that the market may not go down to such levels, but a move to $1264 would trigger the indication that you should be alert to the possibility of lower prices. Overall, the VC PMI forecast the period from September 28, 2017 to September 28, 2018 as a long-term bullish market for gold with targets of $1386 to $1484.

"To recap," MontesDeOca said, "the market came down after the September report into December, coming down below $1264, but did not close below that average, closing at $1332/$1333. Once that low was established, gold exploded up to $1392, completing in two months the target that the VC PMI anticipated on September 28, 2017. Once the market completed this target, it reverted back down, closing below $1264, which was below the average price. Then the market activated the VC PMI’s $1166 target (buy 1 (B1) level) by coming down to a low of $1167.10. It was close enough to meet the criteria of meeting the target of B1."

Forecast for the Coming 12 Months

Then we discussed the next long-term 360-day supply and demand outlook for gold starting September 28, 2018 through September 28, 2019. The gold market on September 28 closed at $1196.20. The 50-day moving average is at $1237.

Courtesy: ema2tradelivesignals.com

"With the market closing below the 50-day moving average," MontesDeOca said, 'it’s confirmation that the trend momentum is bearish. As we look at the annual average price of $1251, with the market closing below that annual average price, it confirms that the price momentum is bearish. However, a close above the average price would negate the bearish signal to neutral. With the market closing below $1251, it has activated buy signals at $1111 to $1027. If the price action crosses above $1251 and closes above $1251, it would activate the extreme above the mean (S1 and S2) of $1336 to $1476."

The VC PMI annual report recommends to take profits if you’re short on corrections to $1111 to $1027 if accomplished and to go long on a yearly reversal stop. If you go long, use $1027 as your long-term stop if activated or, if the market closes above $1111 after testing and reverting above, use that price as your annual stop level protection, if activated. If the market closes through the $1251 average price, raise your stop to 1251 and take profits at the $1336 to $1476 levels during the coming 12 months.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts. It is for educational purposes only.

Disclosure: I am/we are long JNUG, GLD, GDXJ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.