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

Gold New Bull Market a False Dawn?

Commodities / Gold and Silver 2015 Oct 19, 2015 - 07:36 AM GMT

By: Clive_Maund

Commodities

Gold's cheerleaders are at it again, jumping up and down with excitement as they proclaim the birth of a new bullmarket, and herding their flocks into the sector, when they have barely recovered from the last fleecing.

There are 3 factors that we are going to look at which suggest that this latest rally is just another false dawn. One is the unbroken downtrends in gold and silver, the next is the unfavorable alignment of their moving averages, and finally their latest COTs, which call for caution - especially silver's which is downright bearish.


On gold's 5-year chart we can that it is still well within a continuing downtrend and the picture cannot start to be considered to be bullish until it breaks out above this resistance and the nearest resistance level shown and its moving averages swing into bullish alignment. Currently its 50-day moving average is way below its 200-day, a setup which makes a reaction back more likely.

Gold 5-Year Chart

On gold's 6-month chart we can see recent action in more detail and how it appears to be stalling out in the vicinity of its 200-day moving average, where it is overbought. Moving averages are still bearishly aligned - despite them turning up the 50-day is still way below the 200-day.

Gold 6-Month Chart

On gold's latest COT we can see that the Commercials' short positions have been expanding as gold has advanced this month. Although they are not yet at extreme levels, silver's are, and that makes a reaction back soon likely.

Gold COT

If gold and silver are set to react back soon, then it implies that the dollar will strengthen. As we have observed in the recent past, the dollar index has been weakening and dropping back towards key support at 92.5 - 93, which, if it fails, would be expected to lead to a potentially steep drop. However, with the Precious Metals COTs showing marked deterioration, and the dollar's COT improving significantly, it looks like the dollar's key support will hold, for a while at least, and probably generate a rally. This of course would set off a PM sector reaction.

US Dollar Index 18-Month Chart

It is widely assumed in some quarters that the Fed wants to see the dollar drop because it would take pressure off US exporters and generally be better for the economy, but those who believe this don't understand the Fed's priorities. The Fed's main priorities are looking after the interests of the big banks and Wall St, with whom it has a very cozy relationship. Bearing in mind its own bloated balance sheet, it is easy to deduce that it doesn't want rates to rise, because it would create problems with respect to its own debt burden, and would rig rip the rug out from under the stockmarket. So it is quite happy to see the dollar stay high, as it gives it a buffer against raising rates. It is not interested in the effects of the high dollar either on savers or on exporters or even on the economy - as far as it's concerned that's their problem. It is not known how much leverage the Fed can bring to bear to keep the dollar from breaking down, but if they could somehow encourage a further unwinding of the global carry trade, by using the controlled media to manage perceptions, they could largely get the markets to do the heavy lifting for them, so that they need not intervene significantly to stop the dollar breaking down.

Latest COTs indicate that the current rally in the Precious metals will now quickly reverse implying that the dollar will now rally away from the danger zone at the lower boundary of its recent large trading range. Although this doesn't mean that it won't break down later. This also makes it likely that other commodities will turn down shortly too.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2015 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund 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