Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
National Identity Demands Restrictive Immigration - 21st Feb 18
Best Opportunities for Freelance Technical Writing Jobs - 21st Feb 18
4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling - 20th Feb 18
Governments Are LYING about Their Gold Activities while Mining Companies Cower - 20th Feb 18
No Silver Lining Here - 20th Feb 18
Semi Conductor Stocks SEMI Bearish? - 20th Feb 18
The Prisoner Promised Land - 20th Feb 18
Best Car Dash Cam Review: Z-Edge S3 Dual Dash Cam - UNBOXING (1) - 20th Feb 18
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18
How to Trade as We Near March Stock Market Top - 16th Feb 18
Bitcoin as Poison - 16th Feb 18
GDX Gold ETF Weathers Stock Market Selloff - 16th Feb 18
Casino Statistics and Demographics - 16th Feb 18
IS Today Thee Stock Market Turn Day? - 16th Feb 18
Huge SMIGGLE Shopping HAUL, Pencil Cases, Drinks Bottles, Back Packs, Toys.... - 16th Feb 18
Tesla Cash Keeps Burning at $320 a Share - 15th Feb 18
Big Conflict Ahead in the Financial Markets - 15th Feb 18
Stocks Extend Rally Off Friday's Low, But Short-Term Exhaustion Near - 15th Feb 18
Stock Market Out on a Limb... - 15th Feb 18
Things Only a True Friend Would Say About Gold - 14th Feb 18
Global Debt Crisis II Cometh - 14th Feb 18
Understanding Crude Oil Behavior - 14th Feb 18
Stock Market is Getting Scary... - 14th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Gold Price What Breakout?

Commodities / Gold and Silver 2016 Apr 16, 2016 - 10:43 PM GMT

By: Clive_Maund

Commodities

The latest gold COTs are out and they are an absolute horror story, with Commercial short and Large Spec long positions having ramped up to multi-year extremes, which we can take to mean that the dollar is not going to crash its support in the 93 area and will instead rally.

While PM stocks have broken higher, gold has stubbornly refused to and has been dropping back in recent days to complete the Right Shoulder of what is believed to be a Head-and-Shoulders top, as we can see on its 6-month chart below. Once it breaches the neckline of the pattern it should plunge. This will not be a surprising outcome, as it is very rare for a parabolic blowoff move such as we saw earlier to be followed by continued advance.


Gold 6-Month Chart

The 6-year chart also shows why there are grounds for caution here. Gold has stalled out at the upper boundary of the channel shown, with its slow stochastic indicating that it is topping out...

Gold 6-Year Chart

Now we come to the latest COTs, where we see that Commercial Short and Large Spec long positions rose sharply again to new highs last week, just as gold marked out its Right Shoulder peak last Tuesday. Large Specs are "foaming at the mouth" bullish, but look set to end up like the Plains buffalo, with the Commercials, the Big Money players, set to kill them and skin them by the thousand.

Gold CoT

Click on chart to popup larger clearer version.

The latest gold Hedgers chart, which is a form of COT chart that goes back further, shows that Hedger's positions are at multi-year negative values, which again does not augur well for gold.

Gold Hedgers Position
Chart courtesy of www.sentimentrader.com

The marked outperformance of PM stocks relative to both gold and silver has been due to them being grossly undervalued relative to bullion, but now this strong performance is believed to be leading many investors into the jaws of a trap. On its 6-month chart we can see how GDX broke out of its Dome pattern and advanced to new highs, which have not been confirmed by momentum (MACD). Although this chart still looks superficially OK, what we have observed above for gold and its COTs suggests that a bearish Rising Wedge might be forming in GDX, a suspicion that will be confirmed by a sharp breakdown from the converging channel soon.

Market Vectors Gold Miners 6-Month Chart

As ever, the dollar is key, and it has been recent dollar weakness that has encouraged the PM sector recovery, as investors in the sector salivate over the prospects for a dollar breakdown and collapse, However, both the latest dollar and gold COT charts suggest that this is not going to happen - instead, the dollar looks set to rally soon. On its 2-year chart we can see that this year it has dropped back towards the key support level shown at the lower boundary of a potential top area. But the convergence of the downtrend channel and the oversold condition on its MACD and Slow Stochastic suggest that it is likely to turn up again soon, a process which may have begun last week. The big trading range may yet turn out to be a top, but first it looks likely that we will see another rally towards its upper boundary, which, needless to say, would not be good news for the PM sector.

US Dollar Index 2-Year Chart

The latest dollar Hedgers chart, while not exactly raving bullish, is looking a whole lot better than it did a year ago, and certainly indicates that there is scope for a significant dollar rally here...

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

The Fed is now in a very unenviable position, having painted itself into a corner, and is reaping what it has sown. Its first priority is to do the bidding of its crony pals on Wall St and keep the stockmarket levitated by refusing to raise interest rates, but if it continues to follow this course the dollar is likely to crash the support shown on our chart and plunge, an outcome which will upset some very powerful people in Washington. Latest COTs are showing that Big Money is betting on the dollar rallying, which means that a rate rise is probably more likely than many are thinking.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2016 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

© 2005-2018 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