Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Is a Stock Market Crash Imminent or Does this Stock Market Bull Still Have Legs - 25th Apr 18
Gold Price Focusing on May Cycle Bottom - 25th Apr 18
Cash “Vanishes” From Bank Accounts In Ireland - 25th Apr 18
Is the Malaysian Economy a Potemkin Village - 25th Apr 18
Land Rover Discovery Sport Rattling / Knocking Sounds From Car Pillars - 25th Apr 18
China Takes the Long View on Gold-Silver... and So Should You - 25th Apr 18
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

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

© 2005-2018 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