Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Triple Bottom

Commodities / Gold and Silver 2012 Jul 01, 2012 - 11:13 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleThe European Union is a creation of global elitists, the Bilderberg et al, in pursuit of their long-term goal of a world government. Whether this is a good thing or not depends in large part on whether politicians in positions of great power can be trusted to behave fairly and responsibly. In deciding if this is the case you have plenty of empirical evidence to assist you in making up your mind, based on their activities and antics of the past several years and their consequences for the global populace.


The core problem of the European Union, that has led to the major crisis that it now faces is that it is, or has been up to now structurally dysfunctional. When the European Union was created the levels of integration and cooperation necessary to make it run smoothly were simply not possible because the citizens and electorates of the individual states within it refused to cede sufficient sovereignty to achieve this, and many politicians were similarly inclined - it would take a "back to the wall" steadily intensifying crisis such as we have seen over the past several years to make them yield. Here we should note that many politicians in Europe are as much in the dark as those they rule with regard to the master plan of the elites, and they have dug their heels in defending what they view as their national interest, a prime example being Mrs Merkel of Germany - but the situation had become so extreme that she and others like her have finally been forced to give significant ground.

The kind of crisis that we have witnessed in Greece over the past several years would be unthinkable in the United States, which is, in comparison, truly united. Imagine say Alabama or Kentucky going bankrupt - would the rest of the country just stand by and watch and do nothing to assist? - of course not. This is why Thursday night's agreements were such a watershed - they represent a giant stride towards true union in Europe which should prevent individual states being abandoned to their fate in the future.

Once you grasp what is written in the paragraph above, and the markets certainly did yesterday, you will also understand that the immediate fiscal crisis in Europe is set to ease substantially, as the Union is now committed to step in to support bond markets to keep interest rates under control. THAT is the reason markets rallied so strongly yesterday and why the rally looks set to continue. Could this have been anticipated before last Thursday? - on the basis of precedent probably not, as there had been something like 18 European summits preceding this latest one which achieved little or nothing. The COTs and sentiment, however, did show extreme levels of pessimism that should have set more alarm bells ringing. We were of the view that the summit would probably achieve little and that we would see one last plunge into a low that would promote drastic action. Such did not prove to be the case. What we have repeatedly referred to as the "discordant buffoons" in the recent past showed a rare "cordancy" on Thursday night -- perhaps simply because they to get the whole thing over with and get to bed. What about the fact that the debts and liabilities in Europe will turn out to be far in excess of the woefully inadequate €500bn war chest of the European Stability Mechanism? - that is a problem which they will attempt to solve by means the printing press, and when Europe gets printing in earnest, the US Fed is not going to be outdone. Now we come to the practical matter of how significant this reversal is. The short answer is very significant, as pressure will now come off the European bond markets - this is why the euro soared and the dollar tanked yesterday. With a major fundamental roadblock suddenly removed, the current COT structure in many markets and the extremely negative sentiment going into Thursday's momentous agreements have created the conditions for a really powerful rally.

Action is gold and silver was comparatively anemic given what happened to the dollar, and to other commodities like copper and oil, but this is not considered to be a reason to doubt their upside potential over the medium-term, because the COT structure, particularly for silver, and sentiment are at levels that typically precede a powerful rally, and with the crisis in Europe now set to ease following Thursday's summit breakthrough, markets at last have a green light to advance. This is not to say that there isn't plenty to worry about - there is, of course, but markets looks set to climb the wall of worry, the principal driver being the easing of pressure on European bond markets. The derivative problem won't go away - it will continue festering away in the background until one day it explodes and brings the whole system crashing down, but markets don't care about that, that's too far off.

Now let's turn to the charts. On its 6-month chart we can see that while gold certainly had a good day on Friday, its gains were relatively modest given the huge rallies in copper and oil, and the big plunge in the dollar. What can we infer from this? - we can infer that it is going to gain traction and rise a lot more, that's what. The big rallies in copper and oil point to reflation, courtesy of forthcoming largesse from Europe as it tries to save itself.

Gold 6-Month Chart

The 3-year chart for gold reveals that it now has the capacity to make great gains rising off the Triple Bottom of the lows of last September, December and the low of recent weeks. If last week's summit had produced little like its predecessors, then gold would have crashed its lows and plunged, but the summit ended with a "sea change" as Angela Merkel of Germany finally realized that if Germany didn't concede it would go down with the ship. Despite the significant gains on Friday, we can see that we now have an excellent risk/reward ratio for going long gold here, as stops can be set beneath the lows of the Triple Bottom and gold could make strong gains from here as Europe gets pumping.

Gold 3-Year Chart

Gold's COT structure shown below is bullish, nowhere near as bullish as silver's, which is wildly bullish, but solidly bullish nonetheless.

Gold COT

The dollar's plunge on Friday signaled that it is "game over" for this currency, which has been feasting on Europe's misfortunes for many months - it had only been going up because of the euro's plight anyway, and now that the euro has been "saved" it has lost its principal driver. The massive plunge after a weak rally to approach the early June highs that we can see on the 6-month chart for the dollar index shown below is a sign that it is reversing to the downside. We can expect it to continue lower and this will be a factor fuelling the rally in commodities and stocks. You might well ask "If Europe is clearing the way to do a massive Fed style QE, won't this undermine the euro? - of course it will, but this is a longer-term consideration, shorter-term it should rally having just been saved from oblivion, and we should remember anyway that the Fed is not going to stand by and let Europe take the "blue riband" for QE away from it.

US Dollar Index

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2012 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.


Comments

DB
01 Jul 12, 21:32
If its seems too good to be true...it probably is

Hi Clive,

Last week I was hearing how the European crisis was getting worse hence it was inevitable that gold went up. Now that the situation is somewhat improved, I am told that is also good for gold. I am told that gold is a great inflation hedge however in times of low inflation it is even better. Likewise it seems that gold is a very good investment when the USD is falling as it is a risk asset, but good when the USD is rising too as it is also a safe haven.

It seems that just about every economic scenario imaginable is claimed to be positive for the gold price, which makes me suspect that it is just another bubble. So to be certain that it isn't a one way too-good-to-be-true sure thing bet, can you point out some hypothetical scenario in which the gold price might actually fall?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in