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
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Trading Gold and Silver along with the Pros

Commodities / Gold and Silver 2015 May 19, 2015 - 05:53 PM GMT

By: Peter_Degraaf

Commodities

For a number of years the market presence of commercial traders has dictated the direction in the price of gold and silver. With deep pockets and by trading contracts in the futures market without having to back up their contracts with metal, commercial traders acting in concert, can raise the price after a pullback, and cap a rally when their computer trading programs signal that price is ripe for a quick drop.


While no group of traders can change a long-term trend, they can control the short-term trend. We saw a clear example of this in June 2013, when out of nowhere and starting early in the morning, (before US markets opened), someone or a group of people, dumped 12,000 gold contracts (totalling about 1.5 billion dollars of gold), on a thinly traded market in the space of hours. At the same time a large number of silver contracts were dumped as well. It was obvious that no one owned this much physical metal – it was simply a case of sellers of contracts smothering physical demand with ‘paper gold and silver’. No trading system can predict the type of market action we witnessed in June 2013. Nevertheless, by studying the COT reports, we can synchronize our trading with the commercial traders, and reduce our risk of being blindsided.

The challenge facing us, is how to harmonize our trading in line with that of the commercial traders. We do this by studying the COT reports.

(Charts courtesy Stockcharts.com unless indicated).

This chart courtesy Cotpricecharts.com shows the current position of commercial gold traders (bullion banks for the most part), to be ‘net short’ (short positions minus long positions) at 78,000 contracts. The COT ‘net short’ total reached a bottom on May 5 th at 74,000. We are now looking for the next top, as this is where commercial traders do most of their selling. The last five tops came in at 108K, 206K, 105K, 166K and 146K. The average of the last five is 146,000. At the current level on the chart, commercials are buying. As the price of gold rises, these commercial traders tend to sell into the rally, and if we want to trade along with them, (instead of selling to them at the bottom and buying from them at the top), we need to buy near the bottoms on the chart, in order to sell near the tops. (We offer our analysis on the COT reports in our weekend report for both gold and silver). Featured is the monthly gold chart with its 22 month moving average (blue line). This moving average has reflected a major influence on trading, as it provided support between 2009 and 2012, while causing resistance between 2013 and 2015. The supporting indicators are showing positive divergence, and the TSI is getting ready to produce its first buy signal since 2009 (green arrow). A breakout at the second blue arrow will signal the confirmation of the next gold bull market, (which appears to have started in December 2014). The purple arrow shows a breakdown at the moving average which signaled a coming drop in price.

Featured is the monthly chart for GDX, the gold and silver producers ETF. The blue line represents the 20 month moving average. Since Dec 2011, when price broke down below it, this MA has kept price in check. A monthly close above the blue arrow is likely to break that stranglehold. The supporting indicators have been showing positive divergence for quite a while, against the purple arrow. The TSI issued a buy signal in mid-2014 that has been confirmed in January of 2015 (green arrows). Ideally the breakout at 22.13 will wait until after the June lows - although the breakout could come at any time, and the testing of the breakout would be part of the June dip. (Gold and mining stocks usually produce a bottom in June). In any event this coming breakout could mark the beginning of a multi-year rise in price.

Featured is the monthly chart for GDXJ, the junior producers and explorers, and here also we notice the dominant 20 month moving average and its influence on price. The supporting indicators are showing positive divergence and the TSI, after giving a premature buy signal in mid 2014, is preparing to deliver a new buy signal shortly (green arrows). A breakout at the blue arrow is expected to mark the start of the next leg up which is likely to last several years.

Featured is the monthly silver chart with its 22 month moving average. This moving average has provided support between 2009 and 2011, while causing resistance between 2012 and 2015. The TSI is getting ready to issue its first buy signal since 2009 (green arrows). The supporting indicators are showing positive divergence with price. A breakout at the blue arrow will likely mark the start of the next silver bull market.

This chart courtesy www.macrotrends.net (a useful website for chart lovers), shows the ratio between Gold and the US Monetary base. It shows gold to be the least expensive in over 100 years! The time to buy gold is when this ratio is below 1.0, and sell gold when it is above 3.0 (as in 1980).

By Peter Degraaf

Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He issues a weekend report on the markets for his many subscribers. For a sample issue send him an E-mail at itiswell@cogeco.net , or visit his website at www.pdegraaf.com where you will find many long-term charts, as well as an interesting collection of Worthwhile Quotes that make for fascinating reading.

© 2015 Copyright Peter Degraaf - All Rights Reserved

DISCLAIMER:Please do your own due diligence.  Investing involves taking risks.  I am not responsible for your investment decisions.

Peter Degraaf 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