Gold tops $1500: how much higher could it go?

(12 August 2019) Financial markets are on high alert for the second straight week.  Stocks fell across the board on Monday on mounting recession fears amid ongoing trade and currency uncertainty.  Investors sought out traditional safe havens such as the Japanese Yen, bonds and gold as stocks were widely sold.  The situation has deteriorated to such an extent that most European sovereign bonds now have a negative yield while 10-year US Treasury is fast-approaching its all-time low yield of 1.34%.

Gold has benefited from the worsening economic conditions as it traded Monday at a six-year high of $1531. Gold has rallied significantly over the past two months as it broke above important technical resistance at $1375 in mid-June.  With China devaluing the Yuan to mitigate the effects of Trump's tariffs, other emerging market currencies are also caught in the trade crossfire.  For now, the relative stability of gold has made it an attractive port in this financial storm.

But for how much longer?  From a technical perspective, gold looks like it could retest its 2011 high of $1920 over the next year or two.  The short term is less clear, however, as the speed of the current run-up in prices seems ripe for some kind of pullback. 

Certainly, the planetary indicators suggest that the short term outlook for gold is not positive.  While the price of gold fluctuates with many different planetary factors, we should take special note of the approaching Venus-Mars conjunction.  Venus tends to be a bullish influence for gold when it is unafflicted but when it is associated with malefic planets such as Mars, gold becomes more vulnerable to declines. 


Venus and Mars


Due to the occasional retrograde cycles of both Venus and Mars, the Venus-Mars conjunction occurs irregularly, on average about once every two years. This year the faster-moving Venus is due to catch up to and conjoin Mars on August 24.   It will be within a 10-degree range of Mars between August 8 (last Thursday) and September 9. 

A quick analysis of the previous four Venus-Mars conjunctions shows that the price of gold fell significantly each time.  The box width in the charts below capture the time span when Venus was within 10 degrees of Mars.  The date of the exact conjunction is indicated by a vertical line.  I have omitted one conjunction in late August 2015 because Venus was retrograde.  Interestingly, gold actually rose during that conjunction.  The other four instances -- along with the current one -- have both Venus and Mars moving in their more typical forward direction. 




Four data points aren't nearly enough to build a robust correlation, but they do offer some hints into possible future patterns for gold.  In each of the four cases, gold experienced a decline at some point during the 30 to 60-day period of conjunction.   The period near the exact conjunction (Venus-0-Mars) also tended to be particularly bearish.






 


 

While gold looks vulnerable to an overbought technical pullback anyway, the planetary influences make that more likely.  And as luck would have it, Venus is due to enter the sign of sidereal Virgo shortly after leaving its conjunction with Mars.  The Venus transit of Virgo is usually another difficult influence for gold so that is another factor that could weigh on the current rally.  Venus transits Virgo from September 9 to October 3. 






Weekly Market Forecast

While today was negative, stocks generally bounced last week after last Monday's drubbing. The rebound was not unexpected as I thought Jupiter's midweek alignment with the Sun and Venus would likely produce some upside. 

We could well get a similar bounce this week.  Venus is due to conjoin the Sun on Wednesday and Thursday and this is typically bullish.  Thursday has the added feature of being a Full Moon so that could amp up the proceedings in some way, either in terms of trading volume or in the magnitude of the move.  However, the Full Moon does have a deservedly chequered reputation as it is bearish more than it is bullish.  For this reason, we shouldn't be too surprised if the market falls.  And yet, the Sun-Venus pairing is quite positive so there is a decent chance for stocks to rise going into the end of the week. 

More generally, the uncertainty is likely to continue for several more weeks at least as the ongoing Saturn-Ketu conjunction can still pack a punch.

For a more detailed analysis of the markets, please check out my weekly subscriber newsletter which is published every Saturday afternoon (EST).   I outline the key technical and planetary influences for US and Indian stocks for the short and medium term, as well as currencies, gold and oil.









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