Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold - Another False Start

Commodities / Gold and Silver 2014 Jun 30, 2014 - 12:15 PM GMT

By: Clive_Maund

Commodities

The latest COTs are indicating another false start for the Precious Metals sector. There was a very big jump in Commercial short positions in gold last week, but an astounding jump in Commercial short positions in silver, that is believed to be unprecedented. With both already at a high level as a result, it looks like we are in for a rerun of what happened after mid-March.

Gold is now at a crossroads, with the downtrend in force from late 2012 intersecting with the long-term uptrend in force from the start of the bullmarket back in 2001. Before considering the implications of the latest COTs, let's look at the intersection of these trends on the charts to see why this is such an important juncture.


First of all, on its 5-year chart, we can see why gold is at an important juncture here, because it has arrived at resistance at the downtrend line in force from late 2012. This is why the explosion in Commercial shorts here is a very unwelcome development for bulls. Nevertheless the situation that has now developed may only require a relatively modest retracement that does not involve a breach of last year's lows, as happened after the high Commercial short position in gold that had built up in mid-March.

Gold 5-Year Chart

On gold's long-term 15-year chart we can see that the long-term uptrend remains unbroken and also how it is currently intersecting the downtrend in force from late 2012. Our earlier conclusion that a major uptrend should develop from here, or soon, was based in part on the strongly bullish behavior of beaten down junior and mid-cap mining stocks, and this may yet prove to be the case, although the latest COTs are pointing to another retracement first.

Gold 15-Year Chart

The reason why the sudden explosion in the Commercial's short positions in gold and silver is such a negative development for the sector is simply because this is not what you expect to see at the start of an uptrend. Normally, an uptrend starts with widespread bearishness and skepticism on the part of the majority, which gradually eases as prices continue to march higher, but what has happened here is evidence that there is a large bullish crowd who have been waiting in the wings to pounce at the first sign of a major uptrend starting. The Commercials take the other side of the trade and the reason that their short positions have exploded is because the Large and Small Specs have suddenly bust out of the closet again and jumped in with both feet. These people need to be smashed before a sustainable major uptrend can get underway, and the latest data unfortunately shows that they are going to be.

Looking at the latest COT chart for gold we see that the data was reasonably positive just 2 weeks ago, then came a substantial rise before the massive jump last week that has already taken Commercial shorts close to their March peak. This is clearly is not what you want to see when a potential uptrend is still in its infancy at a time when gold has arrived at important trendline resistance - the conclusion is that gold is going to react back here, or soon, and hard.

On the long-term COT chart we can see that despite the sharp jump last week, readings are not that extreme historically, which is why the expected reaction may restore COT readings to a reasonable level before last year's lows are reached.

Gold COT Chart 2

Chart courtesy of www.sentimentrader.com

On gold's 6-month chart we can see the sharp jump on good volume over a week ago. Normally we would expect to see the consolidation that we have seen over the past week lead to another upleg, but we should keep in mind that gold is now at resistance at the trendline shown on its 30-month chart, as already discussed, so it is at risk of dropping back again, perhaps after a false break higher.

Gold 6-Month Chart

Public Opinion on gold is in middling ground at this point...

Gold Public Opinion Chart

Chart courtesy of www.sentimentrader.com

Rydex traders are negative on gold, which in itself is positive...

Rydex Precious Metals Assets Chart

Chart courtesy of www.sentimentrader.com

There is a widespread assumption in the markets now that the stockmarket can't drop, because the banks and the Fed are colluding and have got it all worked out so that the banks can continue to speculate in the stockmarket against the background of perpetually low interest rates. There is only one problem with this, and that is that companies have to make money. Despite the endless money pumping the forces of deflation are already circling and closing in on the US economy - you only have to consider the awful negative 1st quarter GDP figures to realize that - and it could well get worse in the 2nd quarter. A dropping GDP means worsening corporate results, and once players get cold feet because of this a really nasty self-feeding plunge could ensue, zero interest rates or not. The US is facing persistent and worsening stagflation involving a contracting economy and rising prices, with the economy severely weakened by wasting $6 trillion on the Iraq misadventure, which only benefitted the "defense" industry and a clique of criminals. If we see a broad based plunge in the markets, that is the circumstance in which gold could crash its support at last year's lows and drop hard, but here we should note that generally, deflation is good for gold, as it was in the early 30's, so after an initial drop, a la 2008, it should then stabilize and turn higher. This is only a threat at this stage but it is a threat worth staying aware of, particularly in view of the latest COTs.

On the site we look at ways to protect from loss in the event of the sector turning lower soon as expected, and also ways to capitalize on such a drop.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2014 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

6 Critical Money Making Rules