Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Shaping Up for a Major Uptrend

Commodities / Gold and Silver 2012 Jul 23, 2012 - 06:55 AM GMT

By: Clive_Maund


Diamond Rated - Best Financial Markets Analysis ArticleMost would be investors and speculators in the Precious Metals sector at this time look and behave like the raw recruits at the start of the film An Officer and a Gentlemen - listless and muttering pathetically "This might not be the bottom - it could go down again" - so listen up you 'orrible lot and pull yourselves together - by the time you are done reading this you are expected to have cleaned yourselves up, straightened yourselves out and be ready for action - and insubordination will not be tolerated.

Now that I've got your attention we will start by looking at the 3-year chart for gold. On this chart we can see that following the peak attained last August, gold has been consolidating/reacting in some sort of triangular pattern. Some see this pattern as a bearish Descending Triangle and a top area. There are various reasons why this is not thought to be so. One is that there has been no speculative mania phase involving high public participation in this gold bull market so far, and as pointed out by Richard Russell, major bull markets of the type we have seen in gold typically end with such a phase. Secondly, the pattern has the attibutes of a 3-arc Fan Correction, breakout from which will be signaled by gold breaking above the 3rd fanline shown on the chart, which should trigger a powerful uptrend. The support at the bottom of the pattern is clear, important and obvious - so obvious in fact that we should not be surprised to see Big Money force a false break below it in order to trigger stops to run the little guy out of his remaining positions ahead of a surprise reversal to the upside. Nevertheless, buying here has an extraordinarily favorable risk/reward setup, as risk can be strictly limited by placing stops below the support, and upside potential from here is very substantial. What if Big Money does stage the stunt of crashing the support and your stops ARE triggered. We've got an answer to that too - buy back if the price subsequently rises back above the breakdown point, which will be evidence that the move was phoney, and accept the whipsaw loss as the price of the game.

The 6-month chart is useful as it reveals that gold has been trending slowly lower since March beneath a very important downtrend line that is embedded within the Fan Pattern. The importance of this downtrend should be clear from the fact that the price has been repelled from it no less than 8 times already either on contact with it or on close approaches. What this means is that clear move above this trendline will constitute an important breakout that should lead to the price going on to surmount the resistance at the 3rd fanline not far above soon after, and thus a breakout above this trendline will be a major buy signal, although from the evidence we are reviewing today, we don't need to wait for that to happen before establishing positions.

Alright, so why would we remain bullish even if gold crashed the key support at its September and December lows? - wouldn't the failure of such obviously important support lead to a plunge? - well, it probably would but it would also be expected to be followed by a rapid reversal to the upside - here's why..

As the Hulbert Gold Sentiment chart shown below makes plain, the masses are extremely bearish on gold, and when they are it is almost always at, or close to, a significant bottom.

Chart courtesy of

Next we look at the chart showing the Rydex Traders Precious Metals assets. The Rydex Traders specialize in holding low quantities of Precious Metals at price bottoms for the sector, as this chart makes plain. What we are seeing here is thus a good omen for gold and silver prices.

Chart courtesy of

Now we turn our attention to the dollar, for if gold and silver are poised to rally we would expect to see signs of impending weakness in the dollar - and we do, not so much on the price chart, but on indicator charts.

The 6-month chart for the dollar index shows that a second wave up is underway, following the reaction after the big 1st wave up in May, but it also shows that the dollar is having trouble following through and making significant further progress, so far at least. The MACD indicator at the bottom of the chart additionally shows momentum failure on the new high for this move about a week ago, that could be the precursor to a breakdown from the potential bearish Rising Wedge shown, although going on this chart alone it is still too early to say, as what could happen is that momentum improves significantly soon on further strong gains that take the index up out of the potential wedge pattern. However, there is strong evidence on dollar sentiment charts suggesting that such strength will not manifest and that instead the dollar will turn lower and break down soon. We will now look at this evidence.

The following chart shows that the public are now very bullish on the US dollar, with public optimism being very close to its most extreme readings, it also shows that when the public gets like this it is a sign of a top and an imminent reversal. The vertical bars drawn on the chart show the times when the public got it wrong in a big way both on the long and short side, just in past several years. Quite obviously, if the dollar soon turns tail and heads south, it will likely drive a strong rally in gold and silver.

Chart courtesy of

Finally, we are now approaching a seasonally bullish time of year for the Precious Metals that will a exert a positive background influence and provide a tailwind for any advance, as the following chart shows...

So there you have it - everything appears to be shaping up for a major uptrend to begin in gold soon. The 2 most effective strategies at this point are as follows; you have the choice of buying now (adding) to take advantage of the current highly favorable price/time setup, placing protective stops beneath the strong support at the September and December lows - if these stocks are triggered, possibly due to an orchestrated campaign to run people out of positions, then you stand ready to jump back in if the price breaks back above the support, accepting the minor whipsaw loss. The other approach is to wait until the price makes a clear breakout above the important trendline within the Fan pattern shown on our 6-month chart - this approach is safer but would involve sacrificing some gains.

So now that you are looking shipshape and Bristol fashion you know what to do - don't just stand there - get on with it!!

By Clive Maund

For billing & subscription questions:

© 2012 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2019 - 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