Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Price Convincing Upside Breakout Triggering Start of Intermediate Uptrend

Commodities / Gold and Silver 2015 Dec 07, 2015 - 08:49 AM GMT

By: Clive_Maund

Commodities

On Thursday the dollar reversed dramatically to the downside and on Friday gold broke out upside, with both developments being predicated by the most bullish gold COTs for 14 years.

On gold's 3-month chart we can see that, after trying the patience of bulls for weeks as the COT pressure cooker intensified, gold finally broke out on Friday. This was a big decisive breakout on strong volume which COTs indicate is "the real deal". Fortunately the COTs were already so bullish a week ago that we went long ETFs, stocks and Calls before the breakout. As we can see, even after Friday's big move, there is lots more upside potential here, as gold is still heavily oversold on its MACD and way below its 200-day moving average.


Gold 3-Month Chart

Moving on to the 1-year chart, we can see why gold is turning up now, as it is at a classic cyclical low near to the bottom of the large downtrend channel shown. While it remains a fact that it is still in a downtrend, and its moving averages are still in bearish alignment, the super bullish COTs indicate that the least we can expect to see is a rally to the upper boundary of the downtrend channel, with the most being a breakout from the downtrend to kick off a major bullmarket phase.

Gold 1-Year Chart

Bearing in mind the super bullish COT, which we will come to shortly, it is very interesting to observe on the 7-year chart that a strongly converging and correspondingly bullish Falling Wedge may be completing in gold. If this is so, then an upside breakout from this prospective Wedge should occur soon, and if that happens gold is likely to enter a phase of rapid advance. The intensifying disparity between the amount of physical gold supply available and the avalanche of naked shorting of paper gold that has been used to suppress the price until now has created the conditions where an upside breakout from this Wedge could drive a massive spike. The pale red parallel channel line below caters to a worst case scenario that we were earlier wary of, but this has been rendered obsolete by the latest super bullish COTs. There is always the chance that the COT structure will rapidly deteriorate as the price of gold approaches the upper channel boundary, presaging a reversal to the downside again, but this is considered unlikely, and we will cross that bridge when we come to it.

Gold 7-Year Chart

Now to the latest COT, which as you can see makes plain why gold suddenly came bursting through the gate on Friday. The Commercials have now unloaded almost all of their shorts, and have not had such a low short position in gold (virtually non-existent) since late 2001. This tells you all you need to know - which is that we can expect a thumping great rally, even if the bearmarket up to now re-asserts itself later, which it may not - this COT is so bullish it may signal that gold's final low is in and it goes up from here. This should not really come as a surprise considering that we are headed in the direction of a major currency crisis, economic collapse and war, which not even the likes of Apple, Facebook and Netflix will have the power to deflect.

Gold COT

On we go to consider the startling reversal in the dollar on Thursday on its 3-month chart, which precipitated gold's breakout on Friday. Even though we knew it was likely from gold's COTs a week ago and from the Rising Wedge forming on the dollar chart, it was still of shocking magnitude, with the dollar index dropping by 2.3% in just one day, a massive move for a major currency. Ostensibly it was caused by the market's reaction to remarks by Draghi, the head of the ECB, but gold's COTs a week ago showed that this move was already "baked in" and Draghi was simply the catalyst or excuse. The point is that a move of this magnitude following a lengthy period of advance almost always signifies a major reversal. This drop may mark the beginning of the end for the dollar.

US Dollar Index 3-Month Chart

The importance of this dramatic turnaround in the dollar is further emphasized by where it occurred, which as we can see on the 18-month chart for the dollar index, was right at resistance at the March highs and at "round number" resistance at 100. What might be happening is that the dollar is building out a Double Top. Certainly it would seem to be wise to get out of dollar investments here and only consider getting back in if the dollar index can succeed in breaking above 100.

US Dollar Index 18-Month Chart

Conclusion: gold broke out convincingly on Friday to start an intermediate uptrend that will result in worthwhile gains from here for a wide range of investments across the sector. While the bearmarket may reassert itself later, latest gold COTs are so bullish that we may have seen the final low - it may be over. We will know if it succeeds in breaking out of the Falling Wedge shown on the 7-year chart.

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