Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold 2014 - Why You should Bet Against Goldman Sachs

Commodities / Gold and Silver 2014 Dec 23, 2013 - 04:17 PM GMT

By: Clive_Maund

Commodities

It is a tragic irony that at a time when gold and silver are completing large basing patterns after a long and deep correction, and are at last nearly ready to turn up and start their next major uptrends, most investors in the PM sector have been psychologically crippled and rendered impotent by huge losses - some have been ruined. Most investors in the sector, or would be investors, will therefore not partake in the PM sector's next major upleg, and will stand idly by watching it from the sidelines. Not so Big Money which has been and is soaking up the better PM stocks like a giant sponge at knockdown silly prices.


Let's now proceed to examine the evidence that the sector is ready is ready to begin a major new uptrend soon. We will start by looking at the long-term chart for gold.

On gold's 14-year log chart we can see that, despite the severe correction since the August 2011 peak, gold still has not broken down from the large broadening uptrend shown. In the last update, posted on 6th October, we looked for the next major uptrend to begin almost immediately, having observed a large potential Head-and-Shoulders bottom completing. That pattern aborted and we were stopped out (of gold and silver) for a minor loss. Although that interpretation was invalidated, it still looks like gold is in a basing process, and it may be forming a Double Bottom with its June lows, even though it made a new closing low last week.

Gold 14-Year Chart

Some of you may have heard about Goldman Sachs recently calling for gold to drop further to the $1050 area. How likely is that? Well, it could happen, but if it does our chart shows that it will throw up a major opportunity because there is massive support centered on $1000 from the extensive trading in 2008 and 2009 at and below this price level. There are two possible interpretations regarding the underlying reasons for Goldman Sachs' prediction. One is that they have opened a big short position in gold, like they did before the Spring breakdown, and are trying to muscle gold down to that level so that they can exit the trade with a huge profit - this is more possible for them than for most banks because of the extraordinary power they exert over government and politicians etc. The other interpretation is they are trying to talk gold down in order to build up their inventory of gold related investments at knockdown prices.

A chart which suggests that gold's correction is done and that it is ready to turn up immediately is the 20-year arithmetic chart, which shows that the price has now dropped back to meet the parabolic uptrend line that has supported the price from the start of the bullmarket. There is a chart doing the rounds which purports to show that gold has already broken down from a different parabolic uptrend by a big margin and is therefore in a bearmarket, but this chart is invalid because the parabola is skewed and not horizontal at its point of origin in 2001 as ours is. Our parabola certainly looks valid as in addition to being horizontal at its point of origin, it has supported the price at several key junctures.

Gold 20-Year Arithmetic Chart

There is no denying that gold's shorter-term charts, like the 6-month chart shown below, look pretty grim, with downtrends in force and bearishly aligned moving averages, which implies that we may need to see a period of backing and filling before a major uptrend can get established, in order to allow time for moving average alignment to improve.

Gold 6-Month Chart

The latest COT charts for gold are super bullish, and make a strong case for a rally to get started before long. On the COT chart shown below we can see that the Commercials' short positions in gold have dropped back to their lowest levels since at least 2004, so that they are now almost non-existent. They are on a par with their low level in June of this year, which preceded a more than $200 rally in gold. This is a very bullish setup indeed. This kind of indication doesn't seem to have any effect on the average investor, who is simply too dumb to understand what it means. Even if he does, if it doesn't produce the desired effects within days or weeks, he loses patience and quickly forgets about it. We are not going to forget about it.

Gold COT

Chart courtesy of www.sentimentrader.com

The Commodity COT Master Indicator for metals shows a similar situation, with readings for metals at their most bullish since 2008.

Gold COT Weighted Sum of Spec's Total Metal Positions

Chart courtesy of www.sentimentrader.com

The gold Public Opinion chart shows that gold is held in very low esteem by investors at this time which is bullish, although the reading is some way above the extremely low level plumbed in June of this year.

Gold Public Opinion Chart

Chart courtesy of www.sentimentrader.com

Those indefatigable contrarian indicators, the Rydex traders, have reduced their Precious Metals holdings to extraordinarily low record low levels, way below the green buy line on the chart shown below. This is most encouraging or should be for new gold and Precious Metal sector bulls.

Rydex Precious metals Assets

Chart courtesy of www.sentimentrader.com

The dollar meanwhile looks like it shaping up to advance against many other currencies, not for intrinsic reasons but more because other currencies are being subject to even more abuse. On the 3-year chart for the dollar index we can see that it is in a good position to rally away from the strong support in the 78 - 79 area. This support is very important - if it fails the dollar would likely drop down to the low 70's, but it doesn't look like it will fail in the foreseeable future.

US Dollar Index 3-Year Chart

The dollar COT looks quite strongly bullish, with the Commercials going long after being short for a long time, and the Large Specs, who are usually wrong, doing the opposite. Large Specs have swung quite dramatically from long to short in recent weeks. This suggests a dollar rally, which of course may be triggered by more euro weakness. This does not affect the bullish outlook for gold, as there are circumstances in which the dollar and gold can rally together, although a short-term dollar rally may coincide with a gold dip into a final low.

US Dollar COT Chart

Chart courtesy of www.sentimentrader.com

Precious Metals stocks appear to be approaching an important downside target at the zone of strong support shown on our 14-year chart for the HUI index below. They are getting close to this target now, so this is a good time to sort out the better ones to go for once the target is hit or a convincing reversal occurs.

HUI Index 14-Year Chart

The extreme negative sentiment towards gold stocks is made plain by the Gold Miners Bullish Percent Index shown below. This sort of negativity is bullish for PM stocks.

Gold Miners Bullish Percent Index

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2013 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 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