Gold Preparing To Launch

Gold preparing To Launch

Written by David Brady, Sprott Money News

 

This is my first article for Sprott Money—the first of many, I hope—and I am thrilled to be able to say that I believe we are on the cusp of a significant rally.

The positioning of the Money Managers, or “Funds”, in the Gold futures market is at extremes that have typically led to massive rallies in Gold. They are usually net long, but as you can see from the table below, when their net long position is sufficiently low, it tends to lead to significant rallies in the price of Gold. 

Well, at 39k contracts on Tuesday last, this was one of their lowest net long positions since Jan 2017. It clearly indicates a high probability of a significant rally from here (and given the drop in price since then, they are likely even less long, perhaps even net short). We could see a rally of anywhere from 7% to 13% based on prior rallies. At the close of 1288 on Tues, this would mean a rally to somewhere between 1378 to 1455. Sounds good right? But we don’t have to rely on positioning alone for such a forecast. 

Sentiment is a great tool to gauge the direction of all markets, but it works especially well in Gold and Silver markets. It is also primarily a contrarian tool. By that I mean: when everyone is bullish, that is typically the best time to sell, and when everyone is bearish, the best time to buy. My preferred tool in this regard is the Daily Sentiment Index or “DSI”. It was the primary tool that enabled me to call the peaks and troughs in Gold over the past few years. It is showing extreme bearishness in Gold right now.

The DSI measures sentiment on a scale from 0 to 100, with anything below 20 indicating extreme bearish sentiment and anything above 80 indicating extreme bullish sentiment. As of Tuesday, it was showing one of its lowest readings since the bottom in Dec 2015—extremely bearish, similar to levels seen at the lows in the table above. This is counter-intuitively bullish for Gold and matches what positioning is telling us.

Technically, Gold is also oversold, with an RSI of 33. It is also displaying a positive divergence on its MACD Histogram, which is showing a higher low compared to the lower low in price. This can indicate a pending reversal of trend. Fibonacci supports levels are at 1288 and 1270, 61.8% and 76.4% of the rally from 1238 to 1369. We also have a daily trendline support level at 1270, and there is weekly trendline support below at 1245 also 

Gold also has a strong correlation with the Dollar Index. The DXY (or “Dixie” as its known) tends to move inversely to Gold. It has staged a strong rally off its low in Feb but is extreme overbought now with an RSI >70. It was also negatively divergent on its RSI and both MACDs at a higher high in price today. This does not mean it has peaked, but it does indicate that at least a short-term top is close. A move lower in the DXY would also support a rally in Gold.

The only caveat is that Large Speculators, or Funds, remain significantly short the dollar, long euros, and over the last 20 years, the DXY has seldom hit a peak in price under such conditions. But this time could indeed be different.

In summary, based on positioning, sentiment, technicals, inter-market analysis, Elliott Wave Theory and similar readings prior to previous rallies, Gold is at or close to a low here that is likely to set off a rally to 1360 or higher in the coming weeks. 1270 is strong support. Ideally, I would like to see a positively divergent lower low in price below 1288 with a higher RSI, DSI, and/or MACDs to confirm the low is in place for the next big rally to begin. 

Gold preparing To Launch

Written by David Brady, Sprott Money News

 

Check out these other articles by our contributors:

The Gold Spec Washout Begins-Craig Hemke (15/05/2018)

Metals and Miners – The Sleeping Giant Trade - Chris Vermeulen (14/05/2018)

If you had any brains whatsoever, you’d be buying gold.” - Eric Sprott on weak currencies-(Weekly Wrap-Up, May 11,2018)

Comments

83_vf_1100_c jin187 Thu, 05/17/2018 - 14:29 Permalink

  A broken clock is right more often.

  I skipped the article. I assume they are on about paper gold? I don't play that. I only stack the real rocks. No matter what the COMEX manipulators say it is worth the weight does not change. Historically it's true barter value remains fairly constant. I was light into AU when it spiked to $300 back in the 80s. No one was buying at that price. If it spikes to a gazillion dinero an oz I expect no one will be buying. It makes a shitty investment vehicle if you are looking to get rich quick-ish. When the COMEXicans manipulate the price down the Chinese, Russkis and all us stackers buy the shit out of it. I expect my wife and kids will throw one hell of a party one day. I am about all stacked up. Pushing my spare cash in other directions again. I kind of want to retire one day and not eat cat food.

In reply to by jin187

Dragon HAwk Wed, 05/16/2018 - 22:48 Permalink

All it would take is for the common man to figure out all it takes to live to 140 years old is a couple ounces of gold, and we would have true price discovery. has to be something real useful that only physical gold with work as.

mosfet Thu, 05/17/2018 - 03:49 Permalink

Could get to $1360/oz eh?  Well it's already hit 1365 three times this cycle and 1355 five times so I gotta say, big freakin whoopty doo.  Brexit high was 1375 so some resistance there but being that, that's only only 10 bucks above a high already reached 3 times, it's not exactly a breakout.  I'd say 1450 is do'able but banksters likely to come out in force to smash it down like they did every time Gold used to approach $1300 previously from a $1200 bottom.  I'll put a pin in 1396 to 1400 as the high for this cycle; or whatever it runs up to on the day it hits that range.  A Real rally of Dec 2015 proportions would take Gold up +$300 to 1600/oz so anything under $1500 is nothing more than a lame attempt at playing catch-up to even the Fed's fake inflation lies.

Tonight banks looking like they're setting up for another smack down tomorrow to low 1270's on morning low volume.  Funny how 'Normal Market Behavior' in Gold sell-offs virtually always occur during the LBMA/Comex window overlap when it easiest for both UK & US fraudsters to coordinate efforts?

Just once I'd love to see the look on Bezo's face as banks joined up to massively front load spoof sell orders on AMZN and send it down %18 for no reason what-so-ever.  We all know that'll never happen cause they have the Fed's, CFTC & SEC's full support to illegally smash down Real Money as often as they like (to prop up Uncle Scam's Scheiss Dollar), but if they laid a finger on those precious FAANGs we'd find out that bank CEO's aren't in fact too big to jail.

Bring the Gold mosfet Thu, 05/17/2018 - 15:26 Permalink

It turns out unlimited money creation makes investing pretty easy! You have to hand it to the Rothschilds. With full control of the Five Eyes countries, plus at least France, and limited control over quite a bit of the rest of the world, they've come closer to conquering the world than damn near anyone and by stealth. Evil fuckers.

Keep stacking boys and girls! Werewolves and vampires don't like silver and we all like gold!

In reply to by mosfet

slvrizgold Thu, 05/17/2018 - 04:00 Permalink

Ssshh! I want everyone to remain bearish PMs until gold is at least $150-200 higher, silver is $25 and rising, and quality mining stocks are all up 50-100%.

mosfet slvrizgold Thu, 05/17/2018 - 04:03 Permalink

Don't worry CNBC will make sure that Gold reaching $2000/oz is nothing more than minor blip on the scrolling newsfeed.

And if Gold kept up with Oil it already be $2880/oz.

BTW I wonder where that idiot Mr Hanke went, who used to go on about a Silver-Oil correlation.  AG is still $16/oz while WTi's hitting $71.  Only relationship I can see between them is a very messy divorce.

Speaking of Dead Wrong.  ZHer's have been bearish on Oil during the entire time it went from $35 to $71.  I'd get nothing but grief for saying Oil's gonna rise because it's one of the few unmanipulated commodities that tracks real inflation.

In reply to by slvrizgold

Bring the Gold mosfet Thu, 05/17/2018 - 15:33 Permalink

Oh I wouldn't say it's unmanipulated, I'd just say it's vastly harder to manipulate. Thing is you can manipulate it with unlimited fiat, debt tricks, forecasts and Saudi's blowing out the bottom of the Ghawar Field. What you can't do, is expect people NOT to take delivery.

Sooner or later as gold and oil reconnect due to Iran/China/Russia we will see Gold unchained. It's not even really a huge concern for Rothschild. Afterall they have almost unfathomable amounts of gold as well. They are fine with it going up, they just want to be ahead of it and quickly herd people into blockchain SDR with gold in the basket. That's the plan. They just want to stack a bit more and get Russia and China topped up a bit more before they torch all the sovereigns.

Sooner or later Gold will be unleashed and I think an equilibrium point of 10-50k in 2018 purchasing power for the dollar per ounce is where it will settle. That's assuming the rumors of epic gold stashes from WWII and the like are false, which I believe they are. Rothschild can't wait too long. Once Asteroid mining happens they would have issues. According to the economist 30 years ago, it's this year.

When will this really happen? Who knows and don't forget, Mother Nature bats last.

In reply to by mosfet

Davidduke2000 Thu, 05/17/2018 - 04:40 Permalink

this remind me the runners at the start line, the runner named gold is chained to a cement block, with all his good intentions to win the race, he will never be able to do one single step.

666D Chess Thu, 05/17/2018 - 05:36 Permalink

You can call me crazy but if gold was about to shoot up, shouldn't Eric Sprott be trying to buy gold from his customers instead of trying to sell it to his customers? I don't know maybe I'm just silly. 

otschelnik Thu, 05/17/2018 - 07:01 Permalink

Welcome David Brady to economic death porn.  For a decade we ZHer's have been waiting for gold to launch, stawk market to crash, interest rates to double digit, and the fed to be audited.  Hope springs internal. 

Iconoclast Thu, 05/17/2018 - 08:43 Permalink

Desperately clutching at straws article' anyone still using the usual suspect indicators, and any form of tech analysis needs certifying. Gold reacts to fundamental economic issues, on a micro and macro level', it’s the classic safe haven asset, nothing more. 

Iconoclast Thu, 05/17/2018 - 08:43 Permalink

Desperately clutching at straws article' anyone still using the usual suspect indicators, and any form of tech analysis needs certifying. Gold reacts to fundamental economic issues, on a micro and macro level', it’s the classic safe haven asset, nothing more. 

photonsoflight Thu, 05/17/2018 - 09:13 Permalink

Gold has been a manipulated commodity for decades now. It will continue to be manipulated until TPTB decide otherwise or they loose control , until then this is just more nonsense being expressed by varying sellers of the shiny metal.

REMEMBER , if the government gets in a bind , they will just confiscate it and pay you what they want to. Then they will resell at a much higher price. It's been done in the past and will be done again. I would rather have silver and copper. Much more practical and useful. Long strands of copper coated with an insulator being preferred. Even aluminum is more preferable to gold. Aluminum with graphite rods plus uria and you have long lasting, rechargeable, non-flammable batteries.

Tell me, what are you gonna do to survive with gold , except build non-corroding switch plates? Sell it? And what is going to stop them from just taking it? Knowledge and skills are much more valuable than slugs of metal.

Thethingreenline Thu, 05/17/2018 - 11:18 Permalink

TTGL has studied this extensively. Long term cycle analysis reveals POG to remain in similar channel for next 10-12 yrs. Ballpark channel 1000-  1400 POG over next 10-12 years, with periodic overshot and undershoot mid 900’s to mid 1400’s at times. After the 10-14 year period, case can be made for extreme deflation in POG to under 700, or possible parabolic top into 1900’s, but both of these scenarios sometime after 10-14 yrs. this report based on cycle analysis and TRV by TTGL.

TTGL

cpnscarlet Thu, 05/17/2018 - 13:24 Permalink

"This is my first article for Sprott Money—the first of many, I hope—and I am thrilled to be able to say that I believe we are on the cusp of a significant rally."

Famous last words from another shill about to lose all of his integrity in exchange for a Sprott-tendered cut of the take.

So Brady, when in the holy-god-almighty-damn-future do we wait for you to admit you are wrong? Will YOU at least do a hat munch like Turd after two quarters?

gmak Thu, 05/17/2018 - 14:07 Permalink

Fresh blood brought in to write the "to the moon Alice" piece since everyone else is just beaten down by the reality of paper beats rock.

Happy Days Thu, 05/17/2018 - 14:45 Permalink

Sprott and TFMetals (and many others) have been saying for years (I've lost track of their BS) it's going up, breakouts, blah blah, etc. Hey, a stopped clock is right twice a day. Didn't these people ever hear of going short? That's been the big trade with the Feral Reserve on your side.

As long as these "gurus" keep saying it will launch, the Feral Reserve will gun those stop losses (longs). 

I have to laugh when the "Gurus" talk about support. Can one see that the Feral Reserve (via Comex, etc.) will blow the stops away and shake them all out again and again? Do the specs ever learn?

As a floor trader in metals and bonds back in the 80's, I know what goes on and it was rigged back then. When we knew where the stops are, we would take them out. Happened all the time! It's the same now, but more blatant.

Here's what I've observed and done. When the blood is running in the street, that's potentially a good time to go long. What is a good example of blood running in the street? The "Gurus" finally capitulate and or some large miners go belly up. The last time something like that happened was around the year 2000 or 2001. Homestake Mining closed back then, by the way. Gold was around $200-250 per ounce and silver around $5 per ounce give or take. That, my friends, was the time to load the boat! Watch for extreme volume when the blood runs in the street...that means a boatload of longs are running for the exits, but guess who is buying?