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
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
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 15th May 17
Gold Stocks Poised to Soar Sharply Higher! - 15th May 17
This One Undiscovered Pot Stock Could Help Investors Cash In On The “Green Gold Rush” - 15th May 17
WIll Trump Tax Cuts Debt Binge Save Stock Market From Double Top Bear Plunge? - 15th May 17
Trump Rally or Geopolitical Meltdown: Currency Management for Dollar Risk - 15th May 17
A Shallow Stock Market Correction? - 15th May 17

Market Oracle FREE Newsletter

Trading Commodity Markets

Gold Price Glimmer of Hope

Commodities / Gold and Silver 2015 Mar 01, 2015 - 06:29 PM GMT

By: Gary_Savage

Commodities

As most of you who’ve followed me over the years already know, I’m not really expecting a final three year cycle low in the CRB until later in the year. However… there are a few signs popping up that could be indicating that 3 year cycle low is going to come earlier than expected. And by earlier I mean it may have already occurred.

First I want to talk a little bit about oil. I think everyone knows by now that the fundamentals for oil are completely broken, there is simply too much supply, and price will never be able to rise by any significant amount anytime in the near future. I’m starting to see outrageous predictions of $20 oil. However, that is exactly the kind of sentiment I would expect to see at a three year cycle low.


Moving on to some long term charts, you can see that the CRB has reached the kind of oversold levels indicative of a major three year cycle low. By some measures the CRB is more oversold than either of the last two major cyclical bottoms in 2009 & 2012.

Clearly the main driver forcing commodities lower is that the dollar has been in a seven year bull market. However, seven years is just about a normal duration for a dollar bull, and as you can see in the chart below the dollar has retraced 50% of the previous decline, which is coincidentally the same retracement that the previous bull accomplished prior to a bear market. Note the extreme overbought conditions on the monthly chart. With interest rates at virtually 0, and little incentive to raise them in the near future one has to wonder how much upside is left in this bull.

The last thing that anyone is expecting right now would be for the dollars three year cycle to top in a left translated fashion on month 10. I think everyone is expecting the dollar and euro to go to par sometime this year (as am I). I just wonder if it might do the exact opposite and catch everyone on the wrong side of the boat.

And yes I know, my expectation has been for a counter trend move early in the year followed by one more drop into a three year cycle low in the summer or early fall. And that does still remain the most likely scenario.

However, the mining stocks (and energy stocks) are not been behaving like they usually do during an intermediate degree decline, and that has me wondering if gold didn’t possibly make a final bottom back in November, and is leading the CRB’s 3 year cycle low by a couple of months just like it did in 2009. As a matter of fact, the weekly chart of the HUI is exhibiting a number of bullish patterns.

Notice how the recent correction has formed as a bull flag instead of the usual close back below the 10 week moving average, and acceleration downward that we typically see during an intermediate degree correction. As a matter of fact the miners tacked on 4% this week and closed back above the 10 week moving average. Several of the majors like Newmont and Barrick Gold have broken out to new highs. That is a bit unusual during an intermediate degree decline. Usually once the mining stocks lose the 10 week moving average it doesn’t get recovered again until after a final intermediate bottom forms. Also notice that the recent low held support at 180.

I think next week is going to go a long way towards clearing up whether we are just looking at a weak bounce out of a daily cycle low, to be followed by another leg lower, or whether gold may have just printed a slightly shortened intermediate cycle low (I’ll explain in a minute). If the HUI can close strongly above 200 by next Friday, and survive the employment report I’m going to start leaning in favor of the short ICL scenario.

Now let me explain what I’m looking at as it pertains to gold and the possible short ICL. To begin with my preferred scenario is still the bearish one where gold rallies just far enough to break its cycle trend line and then continues down into an ICL in the normal timing band for that event (still 5-6 weeks away). In this scenario resistance in the 1250 ish zone would turn gold back down. That 1250 zone is going to be an important milepost this week. If gold makes it through that level then the short ICL scenario is going to gain a lot of traction.

Now for the bullish scenario. As most of you know in order to confirm an ICL an asset has to break its intermediate trend line. Surprisingly gold did that, at least marginally this week. Granted this could mean that the intermediate decline has only just begun, and after a weak bounce gold will continue down into a final ICL in the normal timing band for that event, complete with a bloodbath phase. Or… It could be that gold dipped just far enough to complete the broken trend line requirement, and then formed a shortened intermediate cycle low.

This could turn out to be the case as the dollar starts to move down into its own intermediate cycle low in the weeks ahead. If gold resumes its normal inverse relationship with the dollar then it could be that gold printed a short ICL and the low probability bullish scenario will come to fruition.

So next week I want to see how gold handles resistance at $1250, and how quickly it gets there. If gold were to reach that $1250 level by Tuesday or Wednesday it would increase the odds of breaking through that resistance zone. But even more important I want to see how the miners perform next week. If the miners end the week with another 5 to 7% gain, and survive the employment report, that is indicative of a new intermediate cycle rally beginning, rather than a counter trend bounce in an overall intermediate decline.

So a word of caution, I don’t want to get everyone’s hopes up too much, and definitely do not start buying call options willy-nilly, as the bear scenario is still by far the most likely outcome. Shortened ICL’s are rare, but they do happen from time to time. That being said, the miners are not acting like they have before during intermediate declines and that warrants at least a small bit of cautious optimism. Like I said, a small glimmer of hope for the long suffering gold bulls.

Click here to follow my daily reports next week as it could be a pivotal week for gold.  

Gary Savage
The Smart Money Tracker

Gary Savage authors the Smart Money Tracker and daily financial newsletter tracking the stock & commodity markets with special emphasis on the precious metals market.

© 2015 Copyright Gary Savage - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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