Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Intermediate Top

Commodities / Gold and Silver 2016 Mar 21, 2016 - 01:52 PM GMT

By: Clive_Maund

Commodities

All the technical evidence suggests that gold is building out an intermediate top area here, which fits with the fundamental situation where complacency and "risk on" are making a comeback, thanks to the boundless generosity of Central Bankers.

Starting with gold's 6-month chart we see that after its parabolic ramp up in January and early February, it has been struggling to make further progress. The supposed (by some) bull Flag or Pennant turned out to be false and although it has edged ahead a little, the passage of time has resulted in its breaking down from the parabola simply by moving sideways, which has, unknown to many, opened up the risk of a potentially severe drop. The most plausible interpretation of pattern development since the parabolic blowoff spike in early - mid February is that it is a bearish Rising Wedge, which the price broke down from about a week ago, before a backtest of the breakdown point with the big up day last Wednesday when the Fed didn't raise rates, which triggered panic short covering.


The pattern may also be classified as an upsloping Head-and-Shoulders top, but to avoid clutter we haven't marked this on the chart. One interpretation that is doing the rounds is that this pattern is the "Handle" of a "Cup and Handle" base, with the parabola being the "Cup", but this is considered invalid, because the Handle should be downsloping with volume declining, instead of which it is upsloping with continuing heavy volume which is viewed as bearish.

Gold 6-Month Chart

The chief reason for showing the 1-year chart for gold below is so that you can compare it with the latest COT chart shown directly below it, which also goes back a year, but this chart does also reveal that gold's advance ran into trouble when it slammed into the trendline target shown.

Gold 1-Year Chart

Gokd COT

Gold's latest COT shows that Commercial short and Large Spec long positions are still at a very high level, which is bearish. There was a slight drop last week but we should not be fooled by this - these figures were taken for last Tuesday's close, when gold had been dropping for 3 days and before it blasted higher on the Fed on Wednesday, so it reasonable to presume that the real readings are back up near or even above the highs. These readings strongly suggest that a sizeable drop is looming.

The latest gold hedgers chart, a form of COT chart, is bearish...

Gold Hedgers Position
Chart courtesy of www.sentimentrader.com

The 6-year chart for gold makes plain that, while gold's rally from the start of the year has certainly been impressive, it is does not necessarily mark the start of a new bullmarket - it might do, but first it will have to break clear out of the major downtrend shown on this chart, which is has yet to do. Right now it is at a perilous juncture perched at the upper boundary of the major downtrend after a steep rise, with two important factors suggesting that it is likely to get beaten down again, one being the highly unfavorable COT structure that we have just looked at, and the other being the fact that the slow stochastic is rolling over at a high cyclical peak - look what followed after the previous occasions that this happened. Fundamentally there are two negative factors coming into play too - the return of a "risk on" mentality where investors are more interested in the broad stockmarket than in gold and the prospect of the dollar rallying again after hitting a downside target.

Gold 6-Year Chart

The gold Optix, or Optimism chart, is in middling ground and doesn't give much indication one way or the other...

Gold Optix
Chart courtesy of www.sentimentrader.com

Finally the Gold Miners Bullish Percent Index is at levels normally indicative of a top. By far the majority of investors are bullish on the sector now, which is obviously a sentiment extreme carrying much more downside risk than upside potential.

Gold Miners Bullish Percent

Now we will look at the latest charts for the dollar index. On its 6-month chart we can see that it dropped to arrive at a trendline target on Thursday, following the Fed saying it wasn't going to raise rates. With the bad news out, and the dollar having arrived at a target not far above strong support in an oversold state, there is a good chance that it will turn higher here - and that the entire commodity complex, which has had a good run on dollar weakness, will now turn lower.

US Dollar Index 6-Month Chart

There are other factors besides whether the Fed decides to raise rates or not that will determine the dollar's trend going forward, with positive factors being safe haven movement into the dollar, and a possible continuation of the carry trade unwind, so it is dangerous to assume that it is "done for" just because the Fed didn't raise rates. Whilst a break below the key support in the 93 area shown on the 2-year dollar index chart shown below would obviously be bearish, and strongly bullish for gold and silver and doubtless other commodities, the latest COTs for the dollar and especially copper, gold and silver suggest that this is not going to happen, and that instead the dollar will turn up from here, which it is certainly well placed to do.

US Dollar Index 2-Year Chart

The conclusion therefore is that the dollar is going to turn up here, or very soon, and that commodities are going to get smacked back down again, especially copper, gold and silver, and oil. Gold in particular is very vulnerable after it recent frothiness and wild excitement among goldbugs.

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

© 2005-2019 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