Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
SPX/NDX/NAZ Hit New All-time Highs - 27th May 17
GBPUSD Top in Place, GOLD Price Ready to Rocket? - 27th May 17
Silver Mining Stocks Fundamentals - 27th May 17
BBC Newsnight Falls for FAKE POLLS, Opinion Pollsters Illusion for Mainstream Media to Sell - 27th May 17
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold Price Very Close to an Important Low

Commodities / Gold and Silver 2014 Sep 29, 2014 - 01:48 PM GMT

By: Clive_Maund

Commodities

Some of you may remember those gold ingot vending machines that started to pop up at airports and other places several years ago, which were of course a sign of a top. If they are still there they have probably been reconfigured to dispense cans of coke and candy, and if so it's a positive sign for gold.

Gold is set up to rally soon because it is oversold, with its COTs and sentiment readings at extremes characteristic of a bottom and also because the dollar is wildly overbought and out on a limb, and looking vulnerable to a reaction.


On gold's 6-month chart we can see that after a rather steep drop this month, gold has been trying to base over the past week, with a run of more bullish looking candlesticks appearing on its chart. It is oversold on short and medium-term oscillators and in a zone of support above its lows of last June and December - a good point to turn up.

Gold 6-Month Chart

On its 4-year chart we can see that gold is still within the large potential base pattern that started to form in June of last year, and towards the support at its lower boundary. While this supposed base could be a continuation pattern leading to renewed decline, COTs and sentiment indicators suggest that it is indeed a base pattern and that gold will now turn higher.

Gold 4-Year Chart

On its 15-year chart we can see that gold has apparently started to break down from its long-term uptrend, but so far the break is marginal, and the now positive COTs and sentiment indicators suggest that it is a false break - a bear trap - and that gold will soon turn higher again, and may begin a major new uptrend.

Gold 15-Year Chart

Gold's latest COT is encouraging for bulls as it shows that readings have continued to moderate to the point that they can now be construed as bullish, as Commercial short and Large Spec long positions have dropped to approach levels from which new uptrends have been born in the past. The Large Specs have certainly curbed their enthusiasm, which is a positive sign.

The Gold Hedgers chart shown below, which is a kind of COT chart and goes back further, makes plain that from the standpoint of traders' positions we are now well into bullish territory - readings above the green line are bullish, and we can see that it is now well above this line, and in the past readings such as this have lead to significant rallies, with a similar reading in 2008 leading to an enormous rally. Looks good.

Chart courtesy of www.sentimentrader.com

The Gold Optix (optimism) chart below makes fascinating viewing as it displays the current all-pervasive pessimism towards gold in graphical form. This chart makes plain that we are close to record pessimism, and thus it can be concluded that we are either at, or very close to a bottom.

Chart courtesy of www.sentimentrader.com

The whole world is optimistic on the dollar now, probably up to and including IS, which is understandable considering how many greenbacks they have robbed from banks, and sentiment towards it is at wild "off the scale" bullish extremes. For this reason, a correction in the dollar looks imminent, even if it later continues higher for a while, and if it is gold and silver should turn higher. Let's now review the evidence.

First, the long-term 11-year chart for the dollar index shows the runup of recent weeks in the context of prior pattern development, and while the runup so far doesn't look all that big historically speaking, it has arrived at a twin target and is critically overbought on its RSI indicator.

US Dollar Index 11-Year Chart

The 4-year chart shows to advantage the dramatic spike in the dollar index, which has resulted in it arriving at the target shown in a wildly overbought state. Thus it is now vulnerable to a sudden reversal.

US Dollar Index 4-Year Chart

The 6-month shows recent action in detail, and how the dollar's advance has ramped up in stages. The RSI indicator at the top of the chart shows that it has been critically overbought for over a month, a situation which cannot persist indefinitely.

US Dollar Index 6-Month Chart

Next, the dollar hedgers chart (COT) shows that positions are already at record extremes - this chart calls for a reversal, and very soon.

Chart courtesy of www.sentimentrader.com

Meanwhile, the dollar optix or optimism index chart shows that optimism also is already at record extremes and is "off the scale" - optimism is so widespread that Barack Obama no longer feels the need to put his cup down when saluting the military - and here we should note that we are much more worried about the example set to youngsters not by his saluting with a plastic cup in his hand, but that it appears to be a nasty carcinogenic polystyrene cup. The record shows that such wild optix index extremes have almost always coincided with a top or closely preceded it.

Chart courtesy of www.sentimentrader.com

Finally, the dollar seasonal chart, which is admittedly only a background influence, shows that the next few months are not historically the best time of year for the dollar.

US Dollar Seasonality 1986-2011

Conclusion: we can now emphatically conclude that gold is believed to be either at or very close to an important low here, especially as the dollar looks set to turn lower soon. Only in the event of an immediate all-out across the board deflationary plunge would gold prices be likely to drop further.

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

© 2005-2016 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