Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold Price Downtrend Looks Set to Continue

Commodities / Gold and Silver 2015 Feb 23, 2015 - 04:31 PM GMT

By: Clive_Maund

Commodities

The reaction back by gold over the past month was preceded by an explosion in Commercial short and Large Spec long positions. On gold's 6-month chart we can see that this reaction has been quite deep, and that it has taken the price back down below the neckline of a potential Head-and-Shoulders bottom pattern, where it should have found support and turned up again. The fact that it didn't is a negative development, that opens up the risk of a retreat back to the vicinity of the lows, although as it is short-term oversold here and on a support level, it could bounce first, then head lower. Moving averages are in a potentially strongly bearish configuration on a medium-term basis, as the 50-day is rolling over beneath a still falling 200-day.


Gold 6-Month Chart

On the latest COT chart we can see the heavy Commercial short and Large Spec long positions that preceded and forewarned of the drop of the past month. This was a warning that we heeded on the site. While these positions have moderated as a result of the drop, they have no so far moderated sufficiently to prevent further losses.

Gold COT

You are doubtless aware of the many fundamental arguments in favor of buying gold, which will not be repeated here. Technically it is in a downtrend as we can see on its 5-year chart shown below, and the trend will remain neutral/down until it can succeed in breaking out above the upper boundary of this downtrend and its moving averages swing into bullish alignment. The surge in Commercial short and Large Spec long positions as the price hit the upper boundary of the downtrend shown accurately called the end of the rally. Although in position for a short-term bounce, the COTs have only moderated somewhat and remain unfavorable.

Gold 5-Year Chart

The latest 15-year chart for gold is not encouraging for the medium-term. Gold broke down from its long-term uptrend, and the rally early this year didn't make it past the underside of the failed channel before the price turned down again. This is negative action. Worst case now is that the decline from the 2012 peak is taking the form of a big A-B-C reaction, with a big C leg down lying ahead of us that could take the price down into the strong support level shown in the $900 - $1000 zone. On the positive side as we have already noted, the big reaction from 2011 may be compared to the big reaction in the mid 70's that punctuated the huge bullmarket of that time. This reaction went on for about 2 years and was followed by a blistering parabolic ramp, which is what we are likely to see in the future when our leaders have finished wrecking the world economy with their QE programs whose purpose is short-term expediency and wealth transfer (to them).

Gold 15-Year Chart

The Gold Hedgers position chart (a form of COT chart) has a reading in middling ground - despite gold's drop of the past month it is still quite a way from being bullish.

Gold Hedgers Position
Chart courtesy of www.sentimentrader.com

After rising into middling ground a month ago, the Gold Optix, or optimism index, has improved, but not enough to prevent further losses over the medium-term.

Gold Optix
Chart courtesy of www.sentimentrader.com

Turning now to Precious Metals stocks, we see that the HUI index reversed to the downside again a month on contact with the upper channel boundary shown and its falling 200-day moving average. This is still a rather ugly picture that could lead to new lows, although the convergence of the channel is a positive sign that it should end quite soon, perhaps after another downleg to new lows. To turn this picture positive the index needs to make a clear break out of the downtrend and above its 200-day moving average so that this indicator turns up.

HUI Index 7-Year Chart

The Gold Miners Bullish Percent Index shows that, by recent standards, investors are still fairly bullish on gold stocks, which of course means that they are likely to drop further, possibly after a short-term bounce.

Gold Miners Bullish Percent 7-Year Chart

Overall, however, stocks remain monstrously undervalued relative to bullion as the following long-term 20-year chart for the large cap XAU index over gold makes plain. This suggests that when the sector does finally turn, (surviving) stocks are going to perform very well indeed.

XAU Index over Gold 20-Year Chart

Now we will look at the all-important dollar, the indicators for which would seem to contradict the medium-term bearish outlook for gold expressed above. Starting with the 6-month chart for the dollar index we see that it has been in a narrowing trading range for almost a month now, a Symmetrical Triangle, which could break either way. The situation is paradoxical, because the background major trend suggests an upside breakout, while sentiment indicators suggest the opposite, with the two huge up days in the middle of last month possibly signifying a final blowoff top. With the Triangle now closing up we are going to find out soon enough which way it will break, which will have a big impact on the gold price, as ever.

US Dollar Index 6-Month Chart

The US dollar hedgers chart, which is form of COT chart, continues to look terribly bearish and suggests that the dollar is either at, or close to, a final top. Note however, that these apparently severely bearish readings may appear quite some time before the final top as was the case in 2008 and 2010, so the dollar may have some life in it yet. This could explain the medium-term bearish picture for gold set out above.

US Dollar Hedgers Position
Chart courtesy of www.sentimentrader.com

The US dollar optix (optimism index) chart likewise looks very bearish, although again such readings may appear a while before the final high.

US Dollar Optix Chart
Chart courtesy of www.sentimentrader.com

Conclusion: although a short-term bounce looks likely for the sector as it is oversold on short-term oscillators, medium-term a potentially quite sharp drop looks likely, that could even take gold to new lows. There is some danger of a destructive final C-wave that takes the gold price down to finally bottom in the zone of strong support in the $900 - $1000. We will being looking at this possibility in more detail soon on the site. An upside breakout from the channel shown on the 5-year chart for gold above, leading to the 200-day moving average turning up, would abort this negative scenario.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2015 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