Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Topping Action Continues

Commodities / Gold & Silver 2009 Oct 25, 2009 - 12:34 PM GMT

By: Merv_Burak

Commodities

Best Financial Markets Analysis ArticleThe gold topping activity continues with the price moving sideways while momentum keeps getting weaker and weaker.  Something’s bound to break soon, will it be up or down?  I hate to say it but at this point my money is on the down side, but will change fast should gold close above the $1075 mark.


GOLD

As Detective Friday would say, “Just the facts ma’am”.  Limited time this week-end so I’ll just cut to the chase.

LONG TERM - No change in the long term P&F chart versus the previous weeks.  Still BULLISH.

The gold price remains above its positive sloping moving average line and the momentum indicator remains in its positive zone just barely above its positive trigger line.  The momentum is showing signs of weakness although more pronounced in the other time periods.  The volume indicator continues to show strength and is at all time high territory, showing no sign of weakening.  The long term rating therefore remains BULLISH.

INTERMEDIATE TERM

The intermediate term indicators are starting to slowly indicate possible changes ahead.  The gold price continues to move sideways but remains above its positive moving average line.  The momentum indicator is showing weakness and has started moving lower.  It has crossed below its trigger line and the trigger has turned downward.  However, the indicator is still in its positive zone and not yet in danger of dropping into the negative zone any time soon.  The volume indicator remains in a positive trend and above its intermediate term positive sloping trigger line.  All in all, the intermediate term rating remains BULLISH.

SHORT TERM

Two things are very clear in the short term chart.  First is the topping process of the gold price, shown as a lateral move after barely any upside following the move into new high territory.  The other is the weakening momentum, during the lateral price move, shown by the short term momentum indicator (13 Day RSI). 

A weakness in the momentum indicator is actually normal after a sharp upside move by the underlying price and especially if the price then goes into a lateral trend.  One thing this could be saying is that the strong move by the RSI cannot be maintained while the price is moving sideways.  The longer the price moves sideways the more the momentum will move towards its neutral level.  This is normal.  It could also be a foretelling of a market top.  I mentioned last week that a move into new all time highs should have been immediately followed by a move at least 20% above the previous high level.  We only moved a couple of % which suggests a lot of selling and shorting going on. 

As I understand it the open interest represents primarily short sales.  If that is true then from the day before the break-out into new highs to this past Thursday the open interest increased by 61,507 contracts representing 6,150,700 ounces of gold shorted.  If we assume an average price of $1060 during this time that suggests a total of $6,519,742,000.00 involved in this shorting process during only the past couple of weeks.  Boy, someone has a lot of money to waste.
   
          

If we look at the daily chart we see that the price of gold started its move on the first of Sept.  The open interest started its sharp rise at the same time.  It had increased 132,129 contracts since the first of Sept.  That’s 13,212,900 ounces of gold.  At an average $1000 per ounce we’re now over the $13,000,000,000.00 mark of short sales. 

The total short interest is 516,832 contracts representing 51,683,200 ounces of gold which represents $54,841,043,000.00 worth of short sales at Friday’s closing price.  WHO has that kind of money?  And WHO has that amount of gold to short?  Or are these just naked shorts with no gold behind it?

THINK ABOUT THAT

I’d better stop there, my head is really starting to spin.

Before I get too many emails about the above, I know it’s not REALLY that simple but simplicity gets to the heart of the matter, even if it might be somewhat – well – simplified.

Gold closed just below its short term moving average line but the line remains sloping in an upward direction.  The momentum indicator is moving lower and is below its negative trigger line but still inside its positive zone.  The daily volume activity has improved over the past few months but not out of the ordinary or expected range.  For the short term the rating has been downgraded to a – NEUTRAL rating, just one level above a full bear rating.

SILVER

Since breaking out of its down trend last Dec, at $11.00 on the P&F chart, silver has been in a steady climb with a couple of rest periods along the way.  The initial break gave us two projections, one to $17.50 and another to $18.50.  We made one but not quite the other (silver got as high as $18.12 so far).  It looks like we might be into another one of those rest periods again.  We have a negative divergence in the momentum indicator which too often precedes a reversal of price trend.  A move back to the $16 support level would be easy although the $15.00 is more likely.  In any event, any rest or reaction here is not expected, at this time, to be of major concern and the up trend would be expected to return.

PRECIOUS METAL STOCKS

What we see in the universe of 160 gold and silver stocks (see the Merv’s Gold & Silver 160 Index) is a universe that is struggling with its all time high levels.  The previous high was reached in Feb of 2008 and the universe exceeded that level last week.  This week it just meandered below.  It did hit an upper resistance trend line so one could have expected a reaction.  The big question is if it is a major stumbling block to further advances or is this just a short nuisance along the way to greater heights?  Well, the long term momentum indicator has been well into new highs versus the previous Feb 2008 highs.  This suggests that the latest move does have strength behind it and any rest or reaction should be short lived with the up trend returning.  How much of a reaction?  Well, I would not expect the reaction to go as low as the lower support trend line might indicate, maybe a 10% to 15% correction.  However, as a technician I will let the continuing market action tell me what it’s up to.

MERV’S PRECIOUS METALS INDICES TABLE

NO COMMENTARY NEXT WEEK

I will be on the move for the next week or two and therefore there will be no commentary during that time.  I will try and get a commentary in for the week ending 06 Nov 2009, otherwise the next commentary will be for the week ending the 13 Nov 2009.

Well, that’s it for another week.

By Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv's Precious Metals Central

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com .

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician ( CMT ) and tries to decipher what's going on in the securities markets. As an underground surveyor in the gold mines of Canada 's Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE .

To find out more about Merv's various Gold Indices and component stocks, please visit http://preciousmetalscentral.com . There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

Before you invest, Always check your market timing with a Qualified Professional Market Technician

Merv Burak Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules