Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

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