In February, I presented my analysis of copper and gold/copper price trends in a post titled, Dr. Copper Prescribes Gold. Now, it’s time to update both charts.
In the previous analysis, most readers preferred a conservative outlook for copper futures prices, predicting a drop to only the equal distance in the CD part, which is $2.45. Since then, the price has declined, but not as rapidly as anticipated.
Let me show you the updated copper futures chart below.
As expected, the price action on the Rising Wedge pattern’s support played out in textbook fashion, with the price breaking below it and then spiking up to retest it before continuing its downward trend.
The price has now reached a double support zone formed by the purple moving average and the black horizontal trendline, between the $3.78 and $3.83 levels.
The RSI indicator has already turned bearish by sinking below the key support of 50, which could further support the breakdown of the aforementioned double support.
The target levels remain unchanged as none of the previous peaks have been surpassed. The nearest target is at $2.45 (CD = AB), followed by $2.02 (large 2nd move = large 1st move down), and the farthest target is the valley of 2008 at $1.25.
The recent release of US GDP data, which was well below expectations, and the contracting Chinese manufacturing statistics are supporting a bearish outlook for the copper price.
Moving next to the gold/copper ratio chart.
For this update, I am presenting a tactical map that focuses on recent changes in price action, in contrast to the previous large-scale quarterly chart which provided a broader outlook.
This new chart allows us to see the shifts that have occurred since February, which may not be apparent on a longer time frame.
The initial phase of the reversal began in 2021, marked by the first blue leg that started from the 368 oz valley, leading to a ratio peak of 542 oz last summer.
Following this, there was a significant correction contained within the red downtrend channel. This correction continued until the ratio reached the 61.8% retracement level, known as the ‘golden cut,’ around 434 oz in February of this year. It was at this point that I alerted you about the major reversal.
Since the previous post was published, the ratio has increased by 10% and currently stands at 514 oz, indicating the start of the blue leg 2. It has surpassed the purple moving average, broken out of the red downtrend, and exceeded the previous high of 498 oz.
The next obstacle is the peak of the first upward move at 542 oz, which the current uptrend is expected to surpass for confirmation.
The RSI indicator is also signaling bullish momentum, with its current position above a key support level and a rising trend.
Looking ahead, the target for the second bullish move can be found at the same distance as the initial reversal, which is around 616 oz. This level also coincides with several important inflection points from 2019-2020.
Beyond that, the next significant barrier is at the top of 2020, which is located at 776 oz, and would represent a significant move up for the ratio.
In the previous post, most readers believed that “something similar to the Great Recession may be on the horizon”, according to the poll results.
While the trend is currently bullish for the gold/copper ratio, it suggests a potentially gloomy outlook for the global economy, as investors seek the safety of gold.
Let me know what your thoughts are on this outlook in the comments below.
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
This post was originally published on INO.com