Gold's Next Crash? ‘Much Lower Prices’ Below THIS Level | Gary Wagner

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

Gold's correction may be ending; holding the 4,000-4,175 support could lead to new highs within 6-8 months.

Gold fell from a record near $5,500 and a roughly $800 rally from about $4,000 to $4,800 to about $4,100, a retracement near 78%. Wagner calls this correction acceptable but extremely deep. He says he sees no bullish signals yet, only potential support. A close back above roughly $4,175 would be needed to restore bullish momentum. The stochastic oscillator was oversold at the earlier peak, and the Elliott wave model assumes an ABC correction ending near the 4,000-4,200 zone, which would start a new motive phase. If that holds, he expects gold to move up over the next six to eight months, with a new high possible by Q1 or Q2 of next year. A break below 4,000 would violate that bullish model and make the move a bear market, with much lower prices possible, including around 3,600. He puts the probability of the bullish scenario at a decent level but says he personally does not expect a break below 4,000.

“My longer term studies actually believe that we could in fact see the market bottom at this point. And if it does, I am looking for prices by, let's say, the first or second quarter of next year to move and maybe even go to a new high.”at 24:40

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

Silver's correction is shallower and its downtrend is losing momentum, but there is no real bullish sentiment yet.

Silver fell from about $91 in mid-May to about $55, then recovered to about $72 before correcting again. This correction is much shallower than gold's. The key level to hold is around $57.50, a zone built from candles in late July and early August. Wagner says he sees no real bullish sentiment yet. A Heikin Ashi chart shows large red candles during the sell-off, with the recovery candles getting very small and the bodies turning into spinning tops. He reads this as the power leaving the downtrend, so silver could trade sideways or drift lower, but without the intensity of the late-August or mid-May sell-offs.

“It's much shallower than that. But the key area that we want to see silver hold is going to be about $57.50... The power is coming out of that downtrend. Now it could trade sideways. It still could trade lower, but not with the intensity that we saw.”at 26:37

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

Gold is the better precious metal to trade now because it has been outperforming silver in both rallies and corrections.

Wagner and Joseph, another technician, have noticed that gold has been outperforming silver in percentage gains on the way up and, to some degree, on the way down. Silver usually outperforms gold in rallies and also outperforms in corrections. Because this pattern has reversed, with gold leading in both directions, Wagner says he would rather trade gold than silver for now.

“Gold has been outperforming in terms of percentage gains on the way up and, to some degree on the way down. Typically, you will see silver outperform rallies and outperform corrections. We've seen that now occur in gold rather than silver.”at 29:46

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

The oil spike from the US-Iran war is pushing inflation expectations, which is why the Fed may hike.

Crude oil has risen sharply since the US-Iran war began, and around $90 a barrel is an extended level not seen in a while. Because oil is embedded throughout the economy, the spike feeds into inflation and, more importantly, inflation expectations. The Federal Reserve is concerned about those expectations. Its only tool to control runaway inflation is slowing the economy, which means raising rates. Wagner therefore treats the oil spike as the source of the inflation concern that is driving the expected Fed hikes, even though oil has eased slightly this week.

“Crude oil has gone up tremendously, since there was a war between The United States and Iran... That's going to have a tremendous impact not only on inflation, but inflation expectations. It's those expectations that the Federal Reserve is concerned about.”at 11:08

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

Fed rate hikes and rising real yields will pressure gold; one hike is priced in, two would hurt more.

Wagner says gold is a non-yielding asset with an inverse relationship to interest rates, so higher rates pressure gold. The Fed had been accommodative, holding rates around 3.5-4% for a long time. Hawkish September minutes and Fed Watch probabilities, about 90% for at least one hike by December, mark a major policy shift. He expects one hike, possibly two, with the first in about three years. The shift is driven by inflation expectations tied to the oil spike, and rate hikes are the main thing that could cap gold's upside. Gold investors have largely priced in a single quarter-point hike, so a second hike would change the picture and could bring more downside pressure. Once real yields rise, investors may rotate into other assets, shifting sentiment from risk-off to risk-on. Gold can hold certain levels while inflation rises only if the Fed does not turn aggressive.

“Gold tends to react to the anticipation of further rate hikes... They're anticipating nothing short term, but by the end of the year, higher rates. And they've been accommodative, and that's a major shift in the Federal Reserve. And that could absolutely put more bearish influence on gold.”at 13:01

Gary S. Wagner · TheGoldForecast.com (Wagner Financial Corporation)

Oil would fall slowly after the Iran conflict ends, because prices lag well behind the real-world events.

Wagner says that if the military action with Iran ends as Trump has said, oil would eventually come down. He has seen oil prices lag greatly behind the real-world developments. Even after shipments resume through the Strait of Hormuz, oil prices do not fall quickly. Because the oil price stays elevated for some time, inflation pressure and the Fed's hawkish response continue, and that keeps pressure on gold.

“It would bring oil down, but oil would come down slowly... I've seen it tend to lag greatly behind that real data. In other words, once military action is over, they're shipping it back through the strait. We don't see oil prices come down quickly.”at 18:29