GOLD: STILL LOOKING SLUGGISH
On April 27 I wrote an article titled, Gold At A Decision Point, wherein I observed conditionally that things looked favorable for the start of another leg up. Since then, the technical picture has improved slightly, but it still feels like a struggle.
Currently, I can see three positive elements in the picture — prices have held above the horizontal support drawn across the December low, a declining tops line drawn frm the February top has been penetrated to the upside, and the PMO is rising. Otherwise, a long-term sell signal was generated when the 50-EMA crossed down through the 200-EMA.
More serious problems are visible on longer-term charts. On the weekly chart below we can see that a long-term rising trend line has been decisively violated, the weekly PMO is falling, and the 17-EMA has crossed down through the 43-EMA. While the EMA crossover confirms the long-term sell signal on the daily chart, but we must also note that the crossover in 2009 quickly reversed.
On the monthly chart the PMO is falling from very overbought levels. Again, we can see the rising trend line violation, but now we can also see that this trend break has happened at the top of a parabolic rise from the 2001 low. This break may be similar to the correction in 2008 (violent, but ultimately setting up another major up leg), but it is also possible that the break in the parabolic could accelerate into a collapse to much lower levels.
Conclusion: Since the top of last summer’s rally, gold’s performance has been disappointing. Promising rallies stall prematurely, and significant damage can be seen on the longer-term charts. Our market posture on gold has been neutral (fully hedged or in cash) since March 15, and nothing is happening at this point to make us change that stance.
6 Comments
Yawn !!! The n-th completely unuseful post about gold. Paper gold in the west is linked to easing policies by the CB. If QEn and/or LTROn paper gold will go up otherwise not. Nothing else to say and to write. But here in India where I am now it TOTALLY different. There is NOT a paper market, just a physical one and indians are buying gold like never before. The indian rupee is down over 20% vs the dollar in the last 12 months, inflation is rampant (don’t thrust the government data, like in China data are underestimated). Despite the recent government fees nothing stops rich indians in buying gold in bars or coins. By the way the private indians are already the largest gold owners group in the world (rich chines are following the same trend). But, still, people reading this blog completely ignore everything happening outside the border of their country. Fools.
“But, still, people reading this blog completely ignore everything happening outside the border of their country. Fools.”
The point for most of the readers of this blog and those looking at a short-term picture of gold (e.g. traders) _is_ what the “paper gold” market is doing. People that bought gold bars and coins and plan to leave them to their heirs don’t care about pricing decision points any more than the people (in the West) buying gold wedding jewelry will care what the price of the gold in their engagement ring is in 15 years.
Gold is not just about trading, short time money or (presumed)long time wealth preservation. Today is again about power. China is the largest gold producer in the world, 300 tonns/year, two times Australia. Each once is bought by the goverment directly or indirectly at current market price. They are also busy buying stakes in major gold mines and buying 150/tonns year (estimated) by covert operations worldwide. They are essentially trading part of their dollar based reserves with gold. They are not stupid, they know how large is the privilege of having a reserve currency and they they will never have a respected paper reserve currency, but a partially gold backed one is a different story. Indians, russians, brazialians and all the others are tired to pay the US for the exorbitant privilege of creating money from nothing. But the US politicians have a 4 year time horizon, too short. And american people will experience a hard shock sometime in the future if they don’t find their own Oliver Cromwell to clean up their house in time.
Hopefully the gold industry will get out of this somewhat sluggish standstill and be on the rise once again. I really enjoyed reading this article, and it was very informative.
from 500 to 2000 in about 6 years, and they still want more. yeah it’s going to 3000, or 4000 Goldbugs, or just pick a number.
DP – thanks for the update, a triangle after a parabolic move means one thing. I’m not gonna say it but people can do their homework.
What is it that is not understood here……..The US government and the bullion banks have no interest what so ever in letting the price of gold rise.
Gold along with silver are manipulated markets.
If you watch the spot prices you see it happening. Charts are useless in this environment.
The manipulators are painting the charts for others to react to. What everyone is waiting for is that moment in time when the price escapes their control and they have no means to bring it back under control………….