Tag: gold outlook
It is getting very exciting in the gold market! We have shown several bullish gold indicators in the last couple of weeks. Here is the thing: the number of bullish indicators keeps on growing. At these low price levels, the number of bullish indicators keeps on growing, and that points to a trend change.
Bloomberg reports today an extremely interesting insight from the options market. Based on data compiled for SPDR Gold Shares (GLD) by Bloomberg, the put-to-call ratio, or the number of bearish options trading compared with bullish ones, is at the lowest since 2012. “The open interest on puts fell to the lowest since mid-July on Sept. 21, signaling bears may be losing their stranglehold on the market.” These data show that gold bears are finally showing signs of fatigue, if options trading is any indication.
Gold rallied strongly yesterday on a safe haven bid amid stock market turmoil. As the stock market was sinking lower, moving closer to its August lows, gold and silver in USD moved more than 2% higher. More interestingly, gold miners rallied more than 5% on the day. The million dollar question is where we go from here. Let’s look at two charts to get an idea of gold’s and the miners’ outlook.
Gold prices could (I doubt it) fall further in the short term, since High Frequency Trading dominates trading action, and central banks need to hide the fact that their policies and currencies are failing, which usually means they suppress gold prices. Gold was formerly the “canary in the coal mine” indicating the failure of monetary and fiscal policies. But active suppression of gold prices has replaced the “canary” with a plastic look-alike that disguises the warning signal which tells us that something is very wrong with our monetary policies.
Gold prices began this week on a slightly negative note as prices drifted back towards their lowest levels since mid-August after US payrolls data failed to provide clarity on the timing of a US Federal Reserve rate hike, and as the dollar steadied against other majors. Despite concerns about the Fed tightening, gold recorded its best month this year, gaining around, gaining about 3.4% for August for its first advance since May.
There is an obvious 7 year cycle in economics. Stock markets are overdue for a major correction. During periods of financial turmoil people have always turned to gold for safety.
I’ve been bearish on gold for so long that my successively lower targets have become almost perfunctory. Lately, I’ve focused on a ‘Hidden Pivot’ target at $817, the attainment of which would presumably wash out the last of the die-hard bulls, clearing the way for a resumption of the long-term bull market. Now, however, I am obliged to consider an alternative possibility — i.e., an explosive move without the washout. Although I lack the imagination to envision such world-shaking news as might cause this to happen, I credit a relatively recent Rick’s Picks subscriber, Michael Gibbons, with jarring me awake.
Could it be that these convincing forecasts are a contrarian indicator? Let’s face it, the “consensus trade” is that gold will and must go lower. When everyone is convinced about an asset moving in one direction, usually the opposite happens.
The inflation camp shares the conviction with deflationists that there is too much debt in the system. But they differ on the outcome. Harry Dent and those in his deflation camp figure that central banks and governments will ultimately be powerless to stop default. They think the purchasing power of the dollar will rise against everything else, including gold. We expect default to occur primarily through inflation, with debts stealthily repudiated through repayment in less valuable dollars.
As we go to press, gold is testing the bottom of its triangle pattern near 1186, but if that level is conclusively broken, a quick move down to 1180 is in play later this week. From a longer-term perspective, a breakdown from the triangle would suggest a measured move objective all the way down to the year-to-date low at 1140. Of course, gold may still manage to bounce from the bottom of its triangle today, but unless we see a bullish breakout above resistance at 1200, the odds favor an awakening for the bears that have been hibernating throughout the first three weeks of April.
A reset in the financial system seems inevitable. We survived other resets, such as the depression of the 1930s, WWII, 1971 separation of the dollar from gold, 1970s inflation, year 2000 stock crashes, and the 2008 financial crash. The world will survive the next reset. Excess debt, fiat currencies, and “printing currency” are the center of global economic problems. Those problems will not be resolved with more debt and “printing currency.” If central banks and politicians choose hyperinflation, all bets are off regarding how high gold and silver will climb, and how crazy our Twilight Zone world will become.
I was very encouraged because gold had broken below its December 2013 low, and it seemed that every pundit and blogger in the world was saying that there was nothing to stop the fall short of $1,000, or even $700. It was widely believed that breaching the prior low was the trigger that would take it much lower—but that’s not what happened. Instead, the new low was a buying signal to Russians, Chinese, Indians, and others, and gold shot right back up again.
The latest Commitment of Traders Report for futures positions held at the close of trading on Tuesday March 17th 2015 is very encouraging. We can easily conclude, based on the data, that the current setup in futures positions point to a meaningful rally, at least in the short run, in both gold and silver. In other words, the selling in the ongoing cycle seems to be behind us, and a new short to mid term cycle should have started last week. To back up our thesis, we are looking at the rate of change of commercials short positions in the COT report. We have used this time and again, so far each time with success.
NUGT, the 3x ETF, is hovering at or below support with a very clear volume signature. The reason I think this might be a chart to pay attention to is where there is this much smoke, there is usually fire. With 200 Million shares on the week, its important to remember one primary cornerstone of Technical Analysis is volume precedes price. A chart that glitters might be worth some attention even if you choose to use another ticker symbol for your trade.