Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is Gold Price Pullback Another Buying Opportunity?

Commodities / Gold and Silver 2015 Feb 13, 2015 - 06:21 PM GMT

By: Sy_Harding

Commodities

There are reasons in the technical charts, in the fundamentals, and in investor sentiment, to believe gold is ready for at least a tradable bear market rally.

In a January column, I noted that gold plunged 48% from its record high above $1,900 an ounce in 2011, to its low late last year, and was one of last year’s worst performers, down 15% for the year.


Not surprisingly, that had investors very bearish on gold’s prospects. BullionVault tracks online investor buying and selling of gold via its Gold Investor Index. It reports, “Gold investing sentiment fell to a five-year low among private individuals as 2014 ended”.

We all know the history of investor sentiment, excessive bullishness and confidence at market tops, and excessive bearishness and fear at market lows.

The problem is that extremes of sentiment only indicate there is potential for a change in market direction. There is no way of knowing what will constitute the ultimate level of either bullishness or bearishness in each cycle.

So we look elsewhere for clues.

On the charts, our technical indicators remain on an intermediate-term buy signal for gold. Gold itself is rallying from a rising double-bottom (a higher low on its last decline), and has broken out above its 20-week moving average again. First levels of potential overhead resistance are at $1,340 and $1,400 an ounce.

Shorter-term, gold became somewhat over-extended above both its intermediate-term 20-week moving average, and its short-term 50-day m.a., making a short-term pullback likely.

That pullback has been underway. The jury is still out on whether it marks the end of another failed rally attempt, or is a normal pullback to retest support before resuming its rally.

However, this time around, in addition to the bearish investor sentiment and technical buy signal, gold has a few things going for it in the fundamentals.

For instance, India, the world’s largest user and importer of gold, imposed a tax on gold imports in 2013, which added to gold’s problems. The intent was to slow gold purchases in an effort to bring India’s current account deficit under control. The tax was successful in doing that, but at considerable cost to India’s important jewelry industry and its exports.

With the current account problem now under control, helped also by the decline in oil prices, India’s Trade Ministry is recommending that the government dramatically cut the gold import tax from the current 10% level to only 2%. Its objective is to revitalize India’s exports by lowering the raw material costs for India’s jewelry industry. Jewelry exports account for 13% of India’s total exports.

Additional positive news comes from the World Gold Council, which reports that gold purchases by global central banks surged last year to their second highest level in 50 years, and projects 2015 will see more of the same given the heightened global economic and financial uncertainties.

That said, in its short-term pullback from the overbought condition above its 50-day m.a., gold has broken fractionally beneath the m.a.

Before initiating new positions, it may be wise to wait and make sure gold does not break out of its encouraging rising trading band to the downside.

In the interest of full disclosure, my subscribers and I have positions in gold bullion via the SPDR Trust Gold etf, symbol GLD, and in gold mining stocks.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2015 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2022 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