6 Remarkable Gold Charts This Week

In the course of the past week, several exceptionally interesting charts were released on GoldSilverWorlds and other websites. In this article, we collect the most interesting charts expressing gold’s fundamental and technical picture.

Weekly chart in a downtrend but at major resistance

The lack of downside follow-through, after the highest volume bar 7 trading ranges ago, has been an anchor for the current rally, of sorts. The caveat as to which way price will move from here is the trend, which favors lower price behavior until there is an indication of change. Right now, such an indication is absent. Of minor concern is the location of the closes for the 3 bars at the end, tending toward the lower range of each bar. The offset is the fact that despite apparent weakness, price did not move lower. If gold trades higher next week, the daily trend will turn up, and confirmation will come from a lower swing high on the next correction (source).

Inverted correlation gold vs equities about to break out?

From a broad perspective, it is likely to see an inverse correlation between gold and Equities just like we saw throughout the last bull market in the 1970’s (source).

The key level to watch on the Dow on a weekly close basis is the 55 week moving average at 15,218. It should also be watched in conjunction with the 55 week moving average on the S&P 500 at 1,672 (see Equities section for more details). The key medium term level on Gold is the double bottom neckline at $1,433. The pattern would target $1,686 (source).

Fundamental divergence in the price of gold

Until last year destroyed gold’s multi-year bull reign, the expansion of the U.S. balance sheet and the price of gold over the past decade moved in near lockstep. From 1999 through 2012, the correlation coefficient of the rising price of gold to the Fed’s climbing assets was 0.95. Even with the tapering of the bond purchases that began in late 2013, the Fed’s balance sheet remains on an upward trajectory and much higher than the price of gold. This suggests we should see much higher prices (source).

JP Morgan turned from seller to buyer

The chart below shows the month-by-month number of contracts that were either provided to the exchange or taken from the exchange by JPM. For a single firm, the numbers are large, but the effect across all gold markets is greater because so many gold transactions follow the price set in the paper futures market.

What jumps out from the chart is the fact that while JPM had been selling gold into the futures market for most of the year, it made a major shift in December, absorbing 96% of all gold delivered. That is a radical shift and an indicator that JPM‘s policy has shifted. Bud Conrad notes: “In my opinion, their deliveries of gold were suppressing the price during 2013, but now their policy has shifted in a way that will support gold going forward” (source).

Big US banks are now net long gold

Another confirmation of the shift by big banks comes from data provided by the US Commodity Futures Trading Commission (CFTC) that shows the net positions of the four biggest US banks in the futures market. There has been a dramatic change from being short the market to now being long (source).