• 287 days Will The ECB Continue To Hike Rates?
  • 287 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Gold in Excellent Position for Seasonal Breakout

This material is an excerpt from a premium update.


 

Last week we wrote about Silver so this week we decided to provide an update on Gold. In looking at the price action and sentiment indicators we find that Gold is once again ripe for what is becoming an annual seasonal breakout. Gold has broken to a new all-time high in three of the past four years and presently, we are anticipating another breakout.

Gold is entering the third month of a consolidation that has range from $1475 to $1560. This tight consolidation is looking like a bullish flag, which is a continuation pattern. It "continues" the previous trend, which of course was bullish. The flag projects to $1825. We have a near-term Fibonacci projection of $1742. Finally, there is a long-term strong Fibonacci target of roughly $1820.

$Gold Index
Larger Image

The Commitment of Traders data (source: timingcharts.com) for Gold remains very encouraging. Commercial hedgers are short 202K contracts (as of last Tuesday). This is well below the October 2010 high of about 300K contracts short. Aside from one or two weeks, their current short position is at a two-year low. Furthermore, open interest is well below the recent high and in fact fairly close to a one-year low. The COT data indicates a very low amount of speculation in the Gold market. Certainly we will need to see that pickup in order for Gold to breakout.

Gold COMEX - Continuous Chart

Note the public opinion from sentimentrader.com. It is only 57% bulls. While not so low we have to view it in the context of a strong bull market. It is a two-year low.

Furthermore, as usual, none of the clowns...I mean Wall Street analysts have an ounce of bullishness regarding Gold. The following is from the Erste Group's July Gold Report:

According to a survey by Barclays not a single one of the 100 institutional investors expects gold to close 2011 among the top performers. On the other hand, the precious metal received the second-highest number of votes - behind natural gas - as expected worst performer of 2011. The 22 gold analysts covered by Bloomberg do not come across as very enthusiastic either, as the following screenshot illustrates. The consensus expects a sharp decline in the gold price from 2012 onwards. The median price targets were USD 1,450 (2011), USD 1,400 (2012), USD 1,231 (2013), and USD 1,159 (2014).

There you have it. Price action is bullish and sentiment indicators are quite supportive of the bullish cause. We didn't discuss how the mining shares actually bottomed prior to the latest bottom in the metals. Several months back the mining shares peaked before the metals. Now we see the reverse. Such action is typical of turning points. Perhaps it is too good to be true but until proven otherwise, we have to anticipate another seasonal breakout in Gold.

Not only is Gold set to breakout but this could finally be the breakout that accelerates this bull market into the beginnings of a bubble. Folks, we are 12 years into this bull market and based on a typical bull market, the returns over the next few years will accelerate relative to the previous few years. If you'd like to learn about our premium service then visit here for more information.

Good Luck!

 

Back to homepage

Leave a comment

Leave a comment