Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Who is Spreading the Virus? UK Coronavirus 2nd Wave Analysis - 30th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part II - 30th Sep 20
The Only Thing Systematic Is The Destruction Of America - 29th Sep 20
Fractional-Reserve Banking Is The Elephant In The Room - 29th Sep 20
Gold And Silver Follow Up & Future Predictions For 2020 & 2021 – Part I - 29th Sep 20
Stock Market Short-term Reversal - 29th Sep 20
How Trump co-opted the religious right and stacked the courts with conservatives - 29th Sep 20
Which RTX 3080 GPU to BUY and AVOID! Nvidia, Asus, MSI , Palit, Gigabyte, Zotac, MLCC vs POSCAPS - 29th Sep 20
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold Extremely Oversold Suggests Imminent Bottom

Commodities / Gold & Silver Sep 14, 2008 - 06:03 PM GMT

By: Clive_Maund

Commodities Best Financial Markets Analysis ArticleA confluence of factors suggests that we have just seen the bottom in gold and silver, or if not that the bottom is very close. The last update called the bottom too early as renewed dollar strength resulted in another downleg in the metals. After the recent heavy losses it may come as something of a surprise to many that the long-term chart for gold still looks positive, with the drop looking like a fairly normal correction.


As we can see, although the decline has taken the price some way below the 300-day moving average - the first time this happened since the bullmarket in gold began - and beneath the trendline shown on our chart, the price has not breached the first really important underlying support level, that arising from the big 2006 - 2007 trading range, and thus far it has barely touched the upper boundary of this strong support. This key support level can be expected to prevent significant further losses.

.,, . With regard to the 2 factors mentioned above which could be interpreted as meaning that the bullmarket is over, we can with the benefit of hindsight observe that the rate of ascent of the long-term 200 and 300-day moving averages had become unsustainably steep, thus a correction well below them had become necessary to moderate their rate of ascent, and with respect to the trendline breach, just as gold broke out of the channel to the upside early this year and then reversed, it can do just the same in the opposite direction - for the support from the 2006 - 2007 trading range is far more important than this trendline, which can in any case be adjusted. Although we may see some backing and filling to slightly lower levels with gold dropping back into the support zone to form an intermediate base area in coming weeks, we are thought to be very close to the lows here. Finally, before leaving this gold chart we should note the extremely oversold condition as shown by the RSI and MACD indicators at the top and bottom of the chart.

The gold COT chart is most interesting at this time, for it shows that both the Large and Small Specs have been abandoning the field in disgust in recent weeks, whilst at the same time the Commercials have been scaling back their short positions. This is exactly what we want to see as an important favorable precondition for another major rally. This is the best it has looked for at least a year, and it suggests that another major uptrend is not far over the horizon.

So if gold now looks good, what about the dollar? For gold to go up it will certainly help if the dollar spike of recent weeks goes into reverse. It was opined on the site some days back that the dollar looks set to run to the 86 area on the index. However this view has since been amended, not because of the big drop on Friday, but because of the 2 factors now presented here. Last year we had commented on the importance of the long-term support level at 79 - 81 on the dollar index that goes back many years to the early 90's, as we can see on the accompanying chart, and pointed out that if it broke below it would be a very bearish development for the dollar. Well, as we know, it did break below it and the dollar proceeded to drop back to a point very close to 70, but then in recent weeks we have had the spike back up to about 80, partly associated with the Fannie and Freddie bailout.

One commentator has in recent days labelled the entire pattern from the 1992 low to the point at which it broke down late last year as a Head-and-Shoulders top. While it is not considered to be that because such a top area has to come after a major advance, not after a major drop as this did, the importance of the line of support, now resistance, at 79 - 81 is very clear, and as is often the case following the breakdown from the Head-and-Shoulders top, there frequently follows a final pullback to the support/resistance line before the decline gets underway in earnest, which is what we appear to have just seen. Despite the sharp drop on Friday, there is thought to be a fair chance that the dollar will push ahead a little further, perhaps as far as 82, before the advance has completely exhausted itself, possibly forming a small Dome shaped top area, which would be typical. Such action would allow gold to base in or slightly above its support zone ahead of the next major advance. The other key factor pointing to an imminent reversal by the dollar to the downside is the Commercial's short positions in it, which have risen to a multi-year high and experience has shown that it is most unwise to bet against them.

Finally, we saw a powerful reversal in Precious Metals stocks late last week, with the HUI index rising over 10% in one day on Friday, after looking like it had breached a crucial support level. This is typical market behaviour at a reversal - break below support briefly, trigger lines of stops and then come roaring back. Such moves are thought to be engineered by big money in order to mop up vast tranches of stock on the cheap, with the little guy left lying in the ditch after having been fleeced.

What about the potential implosion into deflationary depression detailed in the article CATASTROPHE THEORY and the US ECONOMY ? - might that not be an explanation for the recent collapse in commodities and surge in the dollar - and if so could this not continue to lay waste to the commodity sector generally? Yes, it could, but the latest indications in gold, silver, the dollar and their COT charts and in the performance of Precious Metals stocks is that while this risk continues to lurk in the background, and while deflationary forces are gathering stength in the background, it might not take center stage for a while yet, maybe not for a year or two, and in the meantime the hyperinflationary effects of the enormous increases in the money supply aggravated by government largesse in bailing out major banks and other big institutions has the potential to generate an enormous rally in Precious Metals.

The Fannie and Freddie bailout was not about providing a genuine solution to the problems that face the US economy, its purpose was to buy more time for the Fed, the government and Wall St, rather like a child reinforcing the walls of a sandcastle on the beach as the tide comes in around it.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2008 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

© 2005-2019 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