Best of the Week
Most Popular
1.A 'Wicked Rally' in Gold Price Predicted - The_Gold_Report
2.Gold and Silver Bullion Buying Opportunity for 2017? - Nadeem_Walayat
3.The Coming Stock Market Crash and WWIII - Brad_Gudgeon
4.First UK BrExit then Trump, Next BrExit Tsunami Wave to Hit Italy HARD Sunday! - Nadeem_Walayat
5.Trump Sets The Stage For A Huge Gold Rally In 2017 - James Burgess
6.Why We Haven’t Seen Gold Price Rally after Trump Victory - Harry_Dent
7.Silver Bullion Price Buying Opportunity for 2017? - Nadeem_Walayat
8.Trump Stocks Bull Market Furious Rally Towards Dow 20k as Bear Mantra Persists - Nadeem_Walayat
9.Gold Bullion Price Buying Opportunity for 2017? - Nadeem_Walayat
10.Trump's Presidency - Stock Market Crash or Start of New Mega-Trends - Sol_Palha
Last 7 days
India's Stock Market: Nothing "Random" About It - 9th Dec 16
Gold Futures Selling Exhausting - 9th Dec 16
Cheap Large Icicle Christmas LED Lights Review - B&M Stores - 9th Dec 16
US Interest Rates and the Toughest Man Who Ever Lived - 9th Dec 16
Amazon UK Christmas Shopping Useless Delivery Tracking Warning Alert - 9th Dec 16
Euro-zone Crisis - The Soon To Erupt Euro Experiment - 9th Dec 16
Global Market Perspective 3 Killer Charts, 2 Fast Looks at Politics - 9th Dec 16
Trump Could Fuel A Nuclear Energy Boom In 2017 - 8th Dec 16
Our Future Economy, Jobs, Banking, And Governance – Part2 - 8th Dec 16
Developing Knowledge-Intensive Society and Knowledge Industrial Hub in Kerala - 8th Dec 16
Crude Oil and Gold, Silver Precious Metals Link - 8th Dec 16
Stock Market and the Great Middle Class Revolt Gets Bigger - 8th Dec 16
Protectionist Trump Policies To Crash Dollar, Gold and Bitcoin to Soar - 8th Dec 16
The Jaws of Life : The Most Hated Stocks Bull Market in History! - 8th Dec 16
Infrastructure A Budding Asset Class - 8th Dec 16
Trump Stocks Bull Market Furious Rally Towards Dow 20k as Bear Mantra Persists - 8th Dec 16
More Talk About More Economic Growth and More Globalization - 7th Dec 16
Cracks In US Treasury Bond Market, The Japanese Factor - 7th Dec 16
The Rise of Anti-Establishment Italy - 7th Dec 16
Trump Likely to Drive Another Bump in Stock Market Buybacks — Here’s How to Hedge - 7th Dec 16
World War II and the Origins of American Unease - 7th Dec 16
Online CFD Trading for Traders on a Budget - 7th Dec 16
Silver Bullion Price Buying Opportunity for 2017? - 7th Dec 16
The Imminent Multi-Trillion Dollar Surge In Social Security & Medicare Costs - 7th Dec 16
Gold Bullion Price Buying Opportunity for 2017? - 6th Dec 16
Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market - 6th Dec 16
THE Gold Play for 2017 - 6th Dec 16
Trump Sets The Stage For A Huge Gold Rally In 2017 - 6th Dec 16
BrExit Tsunami Claims Emperor Renzi's Scalp, Counting Down to End of the EU, Next? - 6th Dec 16
Failed EU - Means an Expanded Dictatorship - 6th Dec 16
Crude Oil Prices: "Random"? Hardly - 5th Dec 16
The Coming Stock Market Crash and WWIII - 5th Dec 16
This Past Week in Gold Market - 5th Dec 16
Stock Market Short-Term Correction Underway - 5th Dec 16
If Trump Doesn’t Do This, We Will Have the Great Depression 2.0 - 5th Dec 16
India’s Demonetization Could Be the First Cash Domino to Fall - 5th Dec 16
Our Future Economy, Jobs, Banking, And Governance - 5th Dec 16
Gold and Silver Bullion Buying Opportunity for 2017? - 4th Dec 16
First UK BrExit then Trump, Next BrExit Tsunami Wave to Hit Italy HARD Sunday! - 3rd Dec 16
The 10YR Yield and SPX Stocks Bull Markets - 3rd Dec 16
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

How Close is Gold Price to the Final Bottom?

Commodities / Gold and Silver 2013 Feb 22, 2013 - 04:55 PM GMT

By: P_Radomski_CFA

Commodities

Gold roller coaster seems to go on and on without an end. But what we have seen this week was more of a bungee jumping. However, at this time there seems to be no more room for further declines, as major support lines have been reached already or are about to be reached. Does this mean that we are close to the final bottom and that a strong rally will emerge soon? Let us jump straight into the technical part of today's essay to find out - we'll start with the yellow metal's long-term chart (charts courtesy by http://stockcharts.com.)


The most interesting point in this chart is not that prices moved to the long-term support line and reversed but rather the current RSI level, based on weekly closing prices. It is the most oversold since the beginning of the bull market and is now more oversold than after the 2008 plunge.

This is a huge deal. Even based on the above alone, the bottom could be in for gold prices. Since the long-term support line has been reached, the medium-term bottom is probably in, and prices are likely to rally in the months ahead. It seems that perhaps a major top will be seen close to mid-2013.

Let's see how the situation looks like from the non-USD perspective.

$GOLD:UDN Gold (EOD)/PS DB US$ Bearish CME/NYSE

We continue to see a somewhat bullish picture here. Extensive consolidation has been seen after the 2012 breakout. Gold moved below the declining support line this week and while the situation looks a bit discouraging, we expect the recent breakdown to be invalidated - likely today. The support line currently in play has held declines for several months now with only one previous quick dip below it which was invalidated towards the end of 2012.

Now, let's take the Canadian Dollar perspective which yields yet another encouraging analogy with 2008.

$GOLD:$CDW Gold - Spot Price (EOD)/Canadian Dollar - Philadelphia CME/INDX

In this chart, we see that prices are now below the trading channel, much the same as was seen in 2008. That move was followed by a strong move to the upside, and with the situation heavily oversold here today, we expect prices to move back into the trading channel and rally sharply as we saw in 2008. Note the extremely oversold RSI levels - see the red arrows in our chart.

Finally, we would like to address one of our subscriber's questions regarding a death cross technical formation on the gold market. Supposedly, it is a herald of doom for gold investors, but we would like to confront this belief with cold facts.

Q: Could you please address whether we need to be concerned about the recent golden death cross technical formation. Thanks.

Thanks for the daily market alerts! They are very helpful, especially during these trying times!

A: We discussed the death cross in gold in April, 2012 and here's a quote:

Yes, we do have something to say about the death cross in the precious metals market. Something quite to-the-point:

It doesn't work.

To be precise, in our opinion, it doesn't work as signaling a good moment to sell gold or silver. Actually, in most cases it was a very reliable buy (!) signal. Here are the moments where the death cross was seen in gold during this bull market:

End of Q2 2004 - right after a major bottom and before a big rally (lower prices were never seen after that bottom); Mid-2005 - right before a major bottom and before a huge rally (lower prices were never seen after that bottom); Beginning of Q4 2006 - right after a major bottom (lower prices were never seen after that bottom); Q3 2008 - in the middle of the 2008 plunge.

Which of these four scenarios is the odd one? The last one marked neither a good buying point nor a good exit point - it was right in the middle of the extraordinary decline. In all other cases the death cross was a bullish development.

Summing up, 3 out of 4 cases where the death cross was seen were great moments to buy and the 4th one was neither a good nor bad moment to buy.

Therefore, the implications of a death cross are actually bullish.

In reality, gold did move lower in the weeks following the above comment despite the bullish impact of the death cross (it sounds weird, but that's how it used to work), so we now have 3 out of 5 moments that were great times to buy gold, one average moment and one before a not-so-deep decline. It's still not bearish.

By the way, please keep in mind that we have a search function on our website (top right part of the page) that works very well - it breaks the results into sections and can you can also filter them by dates. We will happily reply to questions in this section of updates and the Q&A Panel, but we are naturally not able to provide answers 24/7, and our search engine can do it instantly. You can try searching for "death cross" and you will find, for instance, similar comments for the silver market.

Summing up, support lines are in play for two out of three of this article's gold charts and it's likely that a local bottom has indeed formed. Additionally, RSI levels indicate an oversold situation. The outlook for gold from here is bullish.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2016 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

Catching a Falling Financial Knife