Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21
S&P 500 Rallies To New All-Time Highs – Are The Markets About To Break Higher? - 5th Sep 21
Bond Conundrum - Boom or Bust for Gold? - 5th Sep 21
How the sale of a Sting CD sparked an Entire Online Industry - 5th Sep 21
Three Years of Fresh Thinking With Scott Dylan and Dave Antrobus - 5th Sep 21
Bitcoin Bear Market Trend Forecast 2021 and Model Crypto Portfolio Buying Levels - 4th Sep 21
The Most Actively Traded Companies on the Toronto Stock Exchange - 4th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar Double Top, Gold Prospects Brightening Rapidly

Commodities / Gold and Silver 2016 Feb 07, 2016 - 01:00 PM GMT

By: Clive_Maund

Commodities

For the 1st time in years, everything is in place for a major bullmarket phase to get underway in gold and silver. There are two big reasons for this. One is that the dollar is looking set to drop - and has started to already. The other reason, which is of course related, is that those in power look set to attempt to loosen the intensifying deflationary stranglehold on the world economy by unleashing a global QE blitz that could dwarf anything that has come before, and will end in hyperinflation. Egon Von Greyerz talks about this in an article on King World News entitled Legend Warns Global Panic Is Coming. Don't be put off by the lurid, blood-curdling presentation - I believe that what Von Greyerz writes makes perfect sense, and his gold bullion service outside of the banking system sounds like an attractive option - remember that "What's yours is theirs", so if it is inside the banking system they will simply appropriate (steal) it, if it suits them, when the time is right. Note that I have no association with Von Greyerz or KWN and no incentive for mentioning all this.


Now I want to point out that everything has unfolded pretty much exactly as set out in the article Imminent Dollar Shock and Effect on Gold, Silver & Oil that was posted on www.clivemaund.com on 18th January. This was a subscriber only article and some subscribers did very well after buying things like NUGT.

Now we proceed to look at the latest charts. On the 6-month gold chart we see that it has made good gains over the past couple of weeks, and the big question to address here is whether it is going to get whacked back down again, as has always happened up to now in the recent past, every time it has poked its head out above the parapet. Considering how hard the dollar has dropped over the past couple of days, the rise is not very impressive, and since it has risen up through a still falling 200-day moving average to a point way above its 50-day to arrive at a resistance level at the upper boundary of the major downtrend channel shown on its 5-year chart below, the chances of a pullback soon are considered to be high. However, don't forget the mounting bullish factors described above that are starting to come into play. If may not drop back far, if at all, and it could surprise by breaking out of the downtrend channel, which would trigger a much more dramatic rally.

Gold 6-Month Chart

On the 5-year chart for gold we can see that while there is scope for a minor pullback here or soon, overall the chart looks positive with a strongly converging and thus strongly bullish Falling Wedge now closing up, and it is not seriously overbought on its MACD on this chart. If it does break out upside we could see a meltup that leaves most traders standing mouth agape, although the still unfavorably aligned moving averages suggest that it might take a little more time before the conditions for this sort of move to occur are ripe. We should aware of the possibility however, and use any short-term pullback to aggressively build positions - you know, like the Chinese have done for years now.

Gold 6-Year Chart

GDX is still stuck in its downtrend with still unfavorably aligned moving averages. We saw the sharp rally of recent weeks coming and took advantage of it, using vehicles like NUGT, but now as it is arriving at resistance near to its falling 200-day moving average and the upper boundary of its major downtrend, we should watch out for a pullback. A breakout above the trendline and the resistance level immediately above it will obviously be an important bullish development...

Market Vectors Gold Miners 6-Year Chart

Gold stocks are amazingly undervalued relative to gold itself, more so than they have ever been, and so are viewed generally as an excellent value investment, especially as many gold mining companies have slashed costs and become "lean and mean" so that they are profitable even at current gold prices...

XAU:Gold Chart 1980-2016

The dollar has caved in. This was predicted on the site on 21st January...

US Dollar Index 6-Month Chart From January 21, 2016

And here is what happened...

US Dollar Index 6-Month Chart

It now seems likely that the dollar will continue to drop to arrive at an initial downside target in the 93 - 94 area. This implies more immediate upside for gold, so it may break out of its major uptrend before this move is done, and then have a pullback towards the breakout point, at which point we will of course "back up the truck".

On its 2-year chart we can see that the dollar has now failed at its highs, which is bearish, and it now looks like a large Double Top is completing, as we had earlier suspected. The support in the 93 - 94 area, at the lower boundary of the suspected top pattern, which it looks like it headed towards, should prop it up for a while at least.

US Dollar Index 2-Year Chart

Gold's latest COTs show that, while Commercial short positions are building, they are still quite some way from reaching levels that would be construed as being bearish. So there is scope on this for further gains.

Gold CoT

Gold's latest optix (optimism) chart on the other hand is rising to levels that suggest a pullback before much longer, perhaps after a breakout first...

Gold Optix
Chart courtesy of www.sentimentrader.com

Finally, the gravity of the gathering deflationary implosion is made plain by the shocking chart for the Baltic Dry shipping index. This chart alone implies that they are going to do something dramatic soon in an effort to alleviate the situation, such as a monster global QE program...

Baltic Dry Index 10-Year Chart

Conclusion: the outlook for gold is brightening rapidly. Many observers are expecting it to do now what it has always done in recent years, when it has risen up to challenge its falling moving averages near to the top of its major downtrend channel, which is to do an about face and drop back down again, probably to new lows. This time however there is good chance that it will break out of its downtrend and possibly go into "meltup" mode, along with silver and Precious Metals stocks - especially PM stocks, which are horribly undervalued. Fundamentally, it is not hard to see why this should be the case. The dollar's serious breakdown this week, which results from the NIRP move in Japan, and the market's realization that this makes further rate rises in US much less likely, coupled with now rapidly growing pressure for concerted global QE to beat back the mounting forces of deflation, which are threatening to cause a wave of major defaults and a credit crisis, mean that massive and widespread inflation is not far over the horizon. While this is obviously not good news for the average housewife, what could be better for gold??

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2016 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