Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Crash Edition - 26th Mar 19
Handy Ways to Boost Your Home Income - 26th Mar 19
US Treasury Bond Yield Inversion and Political Fed Cycles - 26th Mar 19
Golan Heights Oil all about the Shekels - 26th Mar 19
Falling Yields a Catalyst for The Gold Catalyst - 26th Mar 19
Can We Lock Up Rachel Maddow Now? - 25th Mar 19
Real US National Debt Might Be $230 Trillion - 25th Mar 19
Friday's Stock Market Sell-Off - New Downtrend or Just Correction? - 25th Mar 19
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Gold and Silver Price A Critical Juncture

Commodities / Gold and Silver 2014 Sep 02, 2014 - 09:00 AM GMT

By: Clive_Maund

Commodities

Gold and silver are at a critical juncture - either they break down to new lows soon or a major new uptrend is about to start. Which is it? - while we cannot be 100% sure either way, we can certainly attempt to figure which way they are likely to break.

Many have been tempted to conclude, because of the dismal response to date by the Precious Metals to the growing geopolitical tensions in various regions of the world, that this is an indication of intrinsic weakness, and that they are therefore destined to break down soon, but there is another way of looking at it.


The vast majority of investors have no idea just how dangerous the worsening situation with Russia really is. The West is looking for trouble with Russia - and like most people who go looking for trouble, they are going to find it - this is a situation that could quickly lead to a World War. They have made it obvious that they are not interested in compromise - they want to overcome and subdue Russia, and the consequences are likely to be grave - especially for Europe which is on the front line. We have gone into this in detail on the site and will not look at it further here, but it deserves to be mentioned at the outset, because this could drive a meteoric rise in Precious Metal prices - and it could start with a big move that seems to come out of nowhere.

With this in mind let's now move on to look at the latest gold charts.

We will start by looking at gold's long-term chart, as we need an overall perspective from the start. On gold's 15-year chart we can see that despite the rough time it has had over the past 3 years, it still hasn't broken down from its long-term uptrend - and if this uptrend is valid, then it is clear that a huge upleg could be in prospect from here. If it were to run to the top of its major uptrend channel again, it would result in a massive increase in the price to the $4000 - $5000 area. Of course, the pattern that has formed over the past year could be a continuation pattern to be followed by a breakdown and another steep drop, but this doesn't look like it is on the cards as it would require a significant easing of geopolitical tensions, considered highly unlikely, and a deflationary implosion, which the money printers will "move heaven and earth" to avoid. Volume indicators on gold's long-term chart look positive relative to price, with Accum-Distrib line in particular looking strong. This chart makes plain that we are at a critical juncture here.

Gold 15-Year Chart

On its 4-year chart we can see that gold has pushed right into the apex of a "Fish Head" Triangle, which is a type of Symmetrical Triangle, where the boundary lines slope inward. The fact that it has pushed into the apex of the Triangle without a clear breakout is a sign of extreme indecision, and is often followed by a period of erratic price swings before a clear trend becomes established - what sometimes happens is that it breaks out in one direction, a false move, that is followed by a violent reversal in the other direction. At this point we are still in the overall neutral trend that began over a year ago.

Gold 4-Year Chart

The main reason for the 1-year chart below is to enable direct comparison with the COT chart for gold shown immediately below it, which goes back about a year.

Gold 1-Year Chart

Gold COT

Gold's COT chart has been unfavorable for many weeks, as we can see below, which is a big reason, along with the strong dollar, why it has been so weak in the recent past. Last week we saw a marked improvement for the 1st time, and while there is clearly room for further improvement, we should keep in mind that it does not have to drop back to a low level before gold can turn up again.

On the 6-month chart we can see that recent action has been rather messy and indecisive. We called the top in July to the day in a Gold Market update at the time, and also the later breakout from the Falling Wedge a few weeks later early in August, and said that it wouldn't get far before turning down again, and it didn't. Overall the action from early July doesn't look bearish, and looks like a reaction to correct the sharp advance in June, pending a more bullish setup for gold. This is still a neutral picture overall and a breakout above the downtrend will be clearly be a bullish development - and all the more so if it should with a big move on strong volume.

Gold 6-Month Chart

The dollar's recent strength is of course a big reason for gold's recent weakness, and while it doesn't look to be over, it might take a breather soon as it is overbought. It is a tragic irony that by doing Washington's bidding and going on the warpath against Russia, Europe is "digging its own grave" not just militarily, since it is in the frontline should a major war erupt, but economically as well - already mortally weakened by years of bureaucratic bungling and incompetence, it is facing the collapse of the euro and disintegration. This is a big reason for the dollar's strength as investors leg it out of Europe to the relative security of the US. On the 6-month chart for the dollar index we can see its robust rally of the past 2 months, and its latest advance out of a bull Flag, which has almost hit target. We didn't see this last upleg coming in the latest Gold Market update, but did in an update on the site before breakout from the Flag occurred. The dollar is heavily overbought here and thought likely to consolidate for a while - it is considered unlikely that it will react back much, if at all, because of funds fleeing beleaguered Europe. Here we should note that continued dollar strength is unlikely to stop gold advancing, as both will be considered safe havens as the global geopolitical situation continues to rapidly deteriorate.

US Dollar Index 6-Month Chart

What about gold stocks? We have been concerned for some time that another top may be forming in PM stocks indices, partly because of the continuing high volume as they tracked sideways after their June - early July runup, but volume has dropped right back in recent weeks as we see on the 6-month for GDXJ below. This is a positive sign suggesting that the strong June - early July upleg was an impulse wave, i.e. a move in the direction of the primary trend. If it was then another strong upleg is likely to start soon. The support shown in the $40 area must hold, and it can be used as a general stop-loss.

Market Vectors Junior Gold Miners 6-Month Chart

The long-term 8-year chart for the S&P500 index continues to look like a catastrophe waiting to happen, a huge bubble searching for a pin. We can see that the massive bearish Rising Wedge that has formed from the early 2009 lows is closing up and volume has continued to dwindle to a very low level - in this situation if heavy selling emerges there will be no bids, and the market will plunge vertically - you sure don't want to be around when that happens. It looks about done here and is considered to be at a good point for shorting/Puts. With Puts you adopt a "swing till you hit" mentality. You might see the 1st or 2nd tranche expire worthless and then hit the jackpot when it caves in. Go for cheap out-of-the-money ones, so you don't lose much if it doesn't work out.

SPX 8-Year Chart

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