Gold And Silver About To Make A HUGE Breakout?

FOMC members keep on repeating, like a mantra, that the Federal Reserve wants to hike interest rates still in 2015. Although the media is ‘hanging on the lips’ of the FOMC and U.S. Fed, it seems that the market has some other thoughts. Whatever happens in the ivory tower of central planners, rate hike or not, their mantra is going on for 5 full years now. No surprise that the market is transitioning in a state of disbelief.

One of the consequences of the rate hike hype was the crash of precious metals prices in 2013. The market truly overreacted, and sent gold, silver and miners into a truly epic bear market state.

Meantime, it seems that the precious metals complex is stabilizing. Given the growing disbelief in the interest rate hike, even precious metals bears are leaving the arena. As explained earlier this week, the number of bullish gold indicators is growing rapidly, suggesting a trend change is close.

The above observation is also reflected in the longer term precious metals charts. Recent price action is becoming more and more constructive with Gold (NYSE: GLD), Silver (NYSE: SLV) and Junior Gold Miners (NYSE: GDXJ) all pushing against their downtrend lines. Chart courtesy: Short Side Of Long.


The above chart shows that a HUGE breakout is now becoming a real possibility, and that gold traders seem to be anticipating (or speculating) that FOMC won’t rise rates in 2015, as noted by Short Side Of Long. Furthermore, if the stock market and economy weakens, more and more of the commentary could turn towards dovish views of more QE easing. One thing is for sure, hedge funds and other speculators are definitely underinvested towards this sector, as evidenced by the following chart. A strong contrarian signal !



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