Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Trading Gold and Silver along with the Pros

Commodities / Gold and Silver 2015 May 19, 2015 - 05:53 PM GMT

By: Peter_Degraaf

Commodities

For a number of years the market presence of commercial traders has dictated the direction in the price of gold and silver. With deep pockets and by trading contracts in the futures market without having to back up their contracts with metal, commercial traders acting in concert, can raise the price after a pullback, and cap a rally when their computer trading programs signal that price is ripe for a quick drop.


While no group of traders can change a long-term trend, they can control the short-term trend. We saw a clear example of this in June 2013, when out of nowhere and starting early in the morning, (before US markets opened), someone or a group of people, dumped 12,000 gold contracts (totalling about 1.5 billion dollars of gold), on a thinly traded market in the space of hours. At the same time a large number of silver contracts were dumped as well. It was obvious that no one owned this much physical metal – it was simply a case of sellers of contracts smothering physical demand with ‘paper gold and silver’. No trading system can predict the type of market action we witnessed in June 2013. Nevertheless, by studying the COT reports, we can synchronize our trading with the commercial traders, and reduce our risk of being blindsided.

The challenge facing us, is how to harmonize our trading in line with that of the commercial traders. We do this by studying the COT reports.

(Charts courtesy Stockcharts.com unless indicated).

This chart courtesy Cotpricecharts.com shows the current position of commercial gold traders (bullion banks for the most part), to be ‘net short’ (short positions minus long positions) at 78,000 contracts. The COT ‘net short’ total reached a bottom on May 5 th at 74,000. We are now looking for the next top, as this is where commercial traders do most of their selling. The last five tops came in at 108K, 206K, 105K, 166K and 146K. The average of the last five is 146,000. At the current level on the chart, commercials are buying. As the price of gold rises, these commercial traders tend to sell into the rally, and if we want to trade along with them, (instead of selling to them at the bottom and buying from them at the top), we need to buy near the bottoms on the chart, in order to sell near the tops. (We offer our analysis on the COT reports in our weekend report for both gold and silver). Featured is the monthly gold chart with its 22 month moving average (blue line). This moving average has reflected a major influence on trading, as it provided support between 2009 and 2012, while causing resistance between 2013 and 2015. The supporting indicators are showing positive divergence, and the TSI is getting ready to produce its first buy signal since 2009 (green arrow). A breakout at the second blue arrow will signal the confirmation of the next gold bull market, (which appears to have started in December 2014). The purple arrow shows a breakdown at the moving average which signaled a coming drop in price.

Featured is the monthly chart for GDX, the gold and silver producers ETF. The blue line represents the 20 month moving average. Since Dec 2011, when price broke down below it, this MA has kept price in check. A monthly close above the blue arrow is likely to break that stranglehold. The supporting indicators have been showing positive divergence for quite a while, against the purple arrow. The TSI issued a buy signal in mid-2014 that has been confirmed in January of 2015 (green arrows). Ideally the breakout at 22.13 will wait until after the June lows - although the breakout could come at any time, and the testing of the breakout would be part of the June dip. (Gold and mining stocks usually produce a bottom in June). In any event this coming breakout could mark the beginning of a multi-year rise in price.

Featured is the monthly chart for GDXJ, the junior producers and explorers, and here also we notice the dominant 20 month moving average and its influence on price. The supporting indicators are showing positive divergence and the TSI, after giving a premature buy signal in mid 2014, is preparing to deliver a new buy signal shortly (green arrows). A breakout at the blue arrow is expected to mark the start of the next leg up which is likely to last several years.

Featured is the monthly silver chart with its 22 month moving average. This moving average has provided support between 2009 and 2011, while causing resistance between 2012 and 2015. The TSI is getting ready to issue its first buy signal since 2009 (green arrows). The supporting indicators are showing positive divergence with price. A breakout at the blue arrow will likely mark the start of the next silver bull market.

This chart courtesy www.macrotrends.net (a useful website for chart lovers), shows the ratio between Gold and the US Monetary base. It shows gold to be the least expensive in over 100 years! The time to buy gold is when this ratio is below 1.0, and sell gold when it is above 3.0 (as in 1980).

By Peter Degraaf

Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He issues a weekend report on the markets for his many subscribers. For a sample issue send him an E-mail at itiswell@cogeco.net , or visit his website at www.pdegraaf.com where you will find many long-term charts, as well as an interesting collection of Worthwhile Quotes that make for fascinating reading.

© 2015 Copyright Peter Degraaf - All Rights Reserved

DISCLAIMER:Please do your own due diligence.  Investing involves taking risks.  I am not responsible for your investment decisions.

Peter Degraaf 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

6 Critical Money Making Rules