Goldman

Sachs

Contrarian

Indicator?

Gold Price To Suffer a Tremendous Drop Says Goldman Sachs

In a report Monday, Goldman Sachs technical analysts, Sheba Jafari and Jack Abramovitz said that they see gold prices falling to $1,100 an ounce after the market was unable to test key resistance around $1,380 an ounce, which they noted represented a key level from the 2011 high to the 2016 lows. 

Goldman Sachs has been fairly bearish on gold, even as prices pushed to a one-year high last month. In a September report, the investment bank maintained its outlook that gold prices will end the year at $1.250 an ounce.

The bank’s reasons for being bearish gold is that it expects the U.S. dollar to shake off recent weakness. Monday, the U.S. dollar index continued to hold near a 10-week high Monday as expectations for a December rate hike rise significantly.

 DYI:

Gold price movements are not just based upon dollar debasement – inflation – but shorter term movements this barbarous relic [fiat central banker’s speak for real money] travels due to international tensions (upside) lack of tension (downside), up on decreasing faith of central banks and down increasing faith in central banks.  The list goes on; DYI’s method of measurement is the Dow/Gold Ratio providing our formula to work off the long term average going all the way back to 1871.  The Dow/Gold Ratio is at 17 to 1 (rounded) as compared to our average of past tops and bottoms at 16 to 1.  Very close to the average meaning gold prices are at fair value neither expensive nor cheap.

 

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So…Our averaging formula directs a modest 22% allocation to precious metals mining company’s shares.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION

Active Allocation Bands (Excluding Cash) 0% to 60%

78% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks-  Total Stock Market Index Fund - VTSAX

[See Disclaimer]

Which way will the price of gold move?  I have no idea.  If prices move up from here lifting mining stocks prices our formula will have us selling down to its proportional average and if prices decline we will increase our allocation at cheaper prices producing higher future returns.  Simple as that.

 

 DYI