Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
Will the Fed be Blind Sided by Stagflation? - 31st May 16
Gold Price Not Ready for a Final Intermediate Cycle Low - 31st May 16
EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - 31st May 16
Gold - Mr. Cool Cucumber is starting to Sweat - 31st May 16
AMAT Chirps, b2b Ramps, Yellen Hawks and Gold’s Fundamentals Erode - 31st May 16
Stock Market Re-Testing Overhead Resistance - 30th May 16
David Cameron Questioned on Out of Control Immigration at TEN TIMES Conservative Election Pledges - 30th May 16
Bitcoin Price Skyrockets And Is Now Up More Than 100% This Jubilee Year - 30th May 16
This Is Not The America My Parents Immigrated To In 1957 - 30th May 16
“Debt, Not The Economy, Reaches Escape Velocity” With Graham Mehl - 29th May 16
EU Referendum, Black Vote LEAVE or REMAIN? Which is Worse for Racism for Britain's Ethnic Minorities? - 29th May 16
Billionaire Gross: Jubilee Debt Relief as Prelude to New Global Economic Order - 29th May 16
Wargaming North Korea - Assessing the Threat - 29th May 16
EU REMAIN Population Forecasts - England 4.1 million Explosion, London Migration Crisis - 28th May 16
A Guide to the Trump-Sanders Debate - 28th May 16
Gold And Silver – At Significant Support. New “Story” Developing - 28th May 16
The Next Systemic Lehman Event - New Scheiss Dollar & Gold Trade Standard - 27th May 16
Energy and Debt Crisis Point to Much Higher Silver, Metals Prices - 27th May 16
Gold Junior Stocks Q1 2016 Fundamentals - 27th May 16
These Crisis Markets Are Primed to Deliver Big Gains, Platinum Never Cheaper! - 27th May 16
Operation Black Vote BrExit Warning for the Wrong EU Referendum - 27th May 16
UK Immigration Crisis Hits New Extreme, Catastrophic ONS Migration Stats Ahead of EU Referendum - 27th May 16
Many of the World’s Best Investors Made Their Fortunes This Way…And You Can Too - 27th May 16
The Ugly Truth About Stock Market Manipulation and Gold Prices - 27th May 16
Gold Price Looking Vulnerable While Gold Stocks Correct - 27th May 16
The 5 Fatal Flaws of Trading - 27th May 16
The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why - 27th May 16
A New Golden Bull or Has the Market Gone Too Far Too Fast? - 27th May 16
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold Price Breakdown Could Result in Slide to $800

Commodities / Gold and Silver 2015 Nov 09, 2015 - 02:11 PM GMT

By: Clive_Maund

Commodities

The predictions made in the recent past for the dollar to rally and gold and silver to drop have proven to be correct. Gold has now dropped for 8 days in a row as we can see on its 3-month chart below, which common sense dictates is increasing the chances of a bounce soon, especially as Commercial short positions eased significantly last week and gold is arriving at a support level in an oversold condition. Gold is oversold relative to its moving averages, which are in bearish alignment.


Gold 3-Month Chart

On the 1-year chart we can see why gold's drop may be arrested soon, at least temporarily, because it is arriving at a support level which turned the price back up in July and August, although if a big dollar rally is getting started, this won't arrest the decline for long. What seems a likely scenario is that gold's decline decelerates and it goes into a trading range for a few weeks near to the July lows before it becomes clearer what will happen next.

Gold 1-Year Chart

The latest COT chart shows that Commercial shorts, which had risen to a high level, prompting us to take a bearish tack, eased considerably last week, and remember that this chart is only up to date as of last Tuesday, so we can presume their shorts eased more later in the week as gold continued to drop. This is increasing the chances of a bounce here or soon, particularly as gold is now arriving at support in an oversold condition, as mentioned above. There is room for these positions to ease a lot more, which is why, perhaps after a bounce or the formation of a trading range, or both, gold looks set to break lower again.

Gold COT

The 7-year chart makes two things very clear. One is that gold remains in a bearmarket regardless of what the cheerleaders claim, as made plain by the fact that it is still stuck in the big downtrend channel shown, which also implies that dollar remains in a bullmarket. The other point this chart makes clear is that we are at a critical juncture here, because if gold breaks down below the pale inner channel shown, then it should drop away steeply towards the lower boundary of the channel, meaning it would target the low $800's.

Gold 7-Year Chart

The biggest cause of gold's weakness is of course the strong dollar, so now we will look at that. On the 3-month chart for the dollar index we can see that the bulls have definitely gotten control of the ball, with a new uptrend developing over the past several weeks, punctuated by big white candles, with the latest strength being triggered by a strong jobs report, prompting speculation that the Fed will raise rates soon, although this is really "much ado about nothing" because they will only raise them by 0.25% if they do. Still it would set off fears of a rate rise cycle which could cause the dollar and the stockmarket to part company after their chummy alliance of recent months, with the dollar heading north and the stockmarket heading south. In this scenario gold and stocks drop together, as they did in 2008.

US Dollar Index 3-Month Chart

On the 18-month chart we can put the dollar's rise of recent weeks into context. As we can clearly see it looks like it is breaking out upside now from a sizeable bull Pennant with its moving averages swinging back into bullish alignment. The last obstacle for it to overcome is the resistance near to the March - April highs in the 100 area. While this could cap the advance it looks much more likely that it will break out to new highs to mount an advance of similar magnitude to the one preceding the Pennant, which means it would target the 120 area. Needless to say, a big dollar upleg such as this would really "put the cat among the pigeons", causing a lot of chaos and consternation especially in the commodities markets and in Emerging Markets.

US Dollar Index 18-Month Chart

The reason that such a big dollar index rally is possible is that the dollar index basket is comprised about 57% of the euro, and the euro is really on the ropes, with the European Union heading for chaos, as its leaders desperately resort to the QE drug to avert an acute liquidity crisis. With the US having backed off from QE, at least for now, that only leaves one direction for the euro to go - down. The acute weakness of the euro in recent weeks is shown on its 3-month chart below, which is the reverse of the strong dollar chart. Long-term charts show that the euro is probably breaking down into another severe downleg.

Euro 3-Month Chart

We will shortly be reviewing what to do with our PM sector inverse ETFs on the site, in which we have racked up substantial gains in the recent past.

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

© 2005-2016 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