Looking Forward to Gold's Next Rally

Looking Forward to Gold's Next Rally

Written by Craig Hemke, Sprott Money News

 

For the past three weeks, we've written and warned about a pending "Spec wash" that would drive gold prices lower in the short term. If you missed these articles, here are the links for your review:

 

 

Having correctly forecasted this ongoing dip in price, we thought it would be fun today to share with you where price is headed next, once this process of washing out the Specs is completed.

 

And it will be completed soon, this much we can say with certainty. There were three such COMEX Gold Large Spec Washes in 2017. If we begin counting days of duration with the day price was initially forced down through the 200-day moving average and end with the day price regained this key technical level, we find this:

 

  •     May 2017 -- 13 days
  •     July 2017 -- 12 days
  •     December 2017 -- 14 days

 

On the current chart below, you can see that today, May 22, is Day 6 of this current cycle:

 

 

But simple timing isn't enough to effectively call a bottom and turn in price. We must also look at other history. In this case, consider that The Fed is expected to hike the Fed Funds rate again at the next FOMC meeting in three weeks.

 

Once again, it appears that the price of COMEX gold is sliding ahead of this announcement... just as it has in the lead-up to each of the previous six Fed Funds rate hikes. However, did you know that COMEX gold has actually rallied in the days following five of these six rate hikes? The chart below shows you this is graphic detail and, as you can see, these post-FOMC rallies have ranged from +6% all the way to +30%.

 

 

And then consider this, too. Buried within the most recent Commitment of Traders data is something that every other gold "analyst" has missed. On the legacy CoT report—where positions are summarized simply as Commercial, Large Speculator and Small Speculator—the GROSS amount of contracts held LONG by the Commercials just hit an all-time high. This is not the NET number discovered by subtracting gross longs from gross shorts. Instead, this is simply the GROSS amount of longs held by the Banks and Dealers that constitute the "Commercial" category.

 

As you can see below, the most recent highs in the Commercial gross long category preceded significant rallies in COMEX gold.

 

  •   From the previous all-time high of 193,668 contracts on the report surveyed November 18, 2014, price rallied $160 or about 14% over the next two months.
  •  From the previous #2 high of 186,976 contracts on the report surveyed July 21, 2015 (coincidentally four days after the infamous "gold is a pet rock" story in the Wall Street Journal), price rallied $120 or 11% over the next three months.
  •   Now we have a new all-time high as of last week with the COMEX Gold Commercials gross long 195,925 contracts.

 

Putting this all together, it's fair to assume—and very likely—that we will soon see a significant rally in COMEX gold that is timed to begin sometime in early June, either just before or just after the FOMC of June 12-13.

 

On your final chart this week, you can see that a rally of just 10% from here would take price to $1,420 or so and well above the breakout level of $1,400 that, since late last year, we've been forecasting to occur by late summer 2018.

 

Well, here we are, and it's pretty plain to see that the forces are now aligning to make this all play out.

 

 

Once above $1,400, and after several tests of this area as support, price will then begin a move toward $1,525, reaching that level sometime later this year or in early 2019. Once above $1,525, following COMEX gold might actually become fun again!

 

But first things first. Watch for a turn and rally in the days ahead as this latest "Spec wash" comes to an end.

 

Looking Forward to Gold's Next Rally

Written by Craig Hemke, Sprott Money News

 

Check out these other articles by our contributors:

Eric Sprott On The Impact Of Higher Interest Rates & The Selloff in Gold Prices - (Weekly Wrap-Up, May 18, 2018)

Ask The Expert- James Grant - May 2018

Are You Still Fearful of Cryptos?- Ryan Wilday (22/05/2018)

The Trend Away From the Dollar to Gold Continues, Turkey Significantly Increases Reserves - Nathan McDonald (17/05/2018)

 

 

Comments

666D Chess Wed, 05/23/2018 - 06:27 Permalink

The best way to convince yourself that gold is going nowhere is asking 10 people at random if they would be willing to buy physical gold and to keep it at home. Probably 1 out of 10 would say yes, the rest would say that it is "dangerous" and that they would rather buy it from a broker and keep it "safe" at a bank's vault. This is why banks are allowed to sell imaginary gold and therefore have an infinite supply of gold to keep prices down. People won't change their mindset. You have to play accordingly. I've been selling my gold this year and I don't regret it at all. At some point in the future I will buy back my gold but not because I think is going to go up but just because I love knowing that I own gold, it makes me feel wealthy. However, if you are expecting to get rich by buying gold, pull up a chair, it's going to take a while. Articles like this are written by people trying to sell you gold. If they were so sure that gold was going to shoot up they would be trying to buy it from you instead of selling it to you. 

lunaticfringe MFL5591 Wed, 05/23/2018 - 13:34 Permalink

It's not against the law to short a commodity and then allow the contract to expire worthless or deliver cash. The point being that as long as you can create fiat out of thin air and have your proxies use counterfeit or worthless fiat to short something- you have not lost anything. You simply print up some more, add a few zeroes, and settle. It's all bullshit. Make believe. 

In reply to by MFL5591

snblitz 666D Chess Wed, 05/23/2018 - 15:06 Permalink

The key  is to learn what is and is not an "investment".

I define an investment as something that returns to you more purchasing power than you started with.

Housing, gold, and stocks have all failed at this over the long term. 

However, all three protected the value of your wealth over the long term.

Here is an example from my Mom comparing various "investments" that she could have made (one of which she did) and what the results were:

https://www.finitespaces.com/2018/05/05/why-stocks-housing-and-gold-are-not-really-investments/ but are still the best place to put your money.

One lesson is that you must learn to free yourself from measuring the value of things with a tool (US dollars) that is losing value (purchasing power) over time.

When dollars lose value (purchasing power) assets rise in price which is not wealth generating.  It is just wealth preserving.

Wealth protection is important.  But it is not "investing".

Some will point to a strong dollar.  But that strong dollar is relative to other currencies which are merely losing value faster than the dollar.

In reply to by 666D Chess

DarkPurpleHaze Wed, 05/23/2018 - 07:43 Permalink

Are you serious with this?

"And then consider this, too. Buried within the most recent Commitment of Traders data is something that every other gold "analyst" has missed."

Sooo let me get this straight.

You're claiming to have some special insight that no other analyst has yet realized or is aware of???

Even when you've stated NUMEROUS times the COT is fabricated/skewed B.S.? 

But now you're saying that only YOU exclusively have gleaned and sorted through the B.S. tea leaves of the COT and have some type of prescient analysis that you won't hear anywhere else and we'll see gold MAYBE hit $1500 in 2019?

Lol, are you kidding yourself or do you really think people are idiots and will suck that up, again? You can only hope.

How about looking back at the not so distant past and revisiting all the hopium predictions for 2018, 2017, 2016, 2015, 2014 etc...that were spewed out by yourself, Sprott, Maguire that never even came close to reaching the phony, semi-deluded weekly metal pumping "analysis" you try to foist upon real people week after week.

Hey, maybe even Maguire will vouch for you?

http://www.thedailyeconomist.com/2017/07/metals-analyst-andrew-maguire-…

~~~~~~~~~

Apparently lacking awareness, the beetle and his "analysis" inevitably flirted with the edge of credibility one too many times...

 

https://m.imgur.com/t/funny/HbknlGG

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

"You can smell the breakout!" ~ James "Turd" Comey

~~~~~~~~~~~

fore·bod·ing

noun

  1. 1.
    fearful apprehension; a feeling that something bad will happen.

    (ex.)"...he couldn't make sense nor explain that forboding feeling and consequences for repeatedly failing (and unwilling) to see the EURO is going to collapse and NOT the USD."

  2. synonyms:apprehension, anxiety, trepidation,disquiet, unease, uneasiness, misgiving, suspicion, worry, fear, fearfulness, dread, alarm; 
  3. When everyone realizes you'll $hill whatever talking point you're given no matter how ludicrous it sounds...just like CNN does.
  4. That feeling you get when a strong USD has completely destroyed your deluded narrative to the point you can't stomach or accept how wrong you've been.

 

Bahamas Wed, 05/23/2018 - 10:21 Permalink

Gold is like the spare tire in the back of your car. You hope you'll never have to use it, but in case of a flat, you're glad you have it.

wonger Wed, 05/23/2018 - 10:40 Permalink

The cot readings on 11/07/2017 nailed the low within 1 day and 4 points, the cot readings on 12/12/2017 nailed the low on the exact day, 15/05/2018  cot readings says were going to rally above 1400, if you think the cot data is meaningless, then look again!

everything1 Wed, 05/23/2018 - 13:44 Permalink

Not until the next huge QE debasement.  I sometimes thought 900-1100 is where we should be at, but gold is an outlier, it's on it's own, cooking the real price of inflation, debasement, and fiat creation into it's value, from a global perspective of course.

I think it's good to keep 5-10 oz. socked away somewhere, just in case, but the dollar will be the last to fall so U.S. people's don't worry to much.

InnVestuhrr Wed, 05/23/2018 - 14:29 Permalink

The trend IS away from the USD, but it is to the Yuan, NOT shiny shit.

The Chinese regime wants the Yuan to be the world's currency, not shiny shit.

Does not matter what shiny shit & baubels the proletariat buy, fiat is the only thing that regimes will allow.

stacking12321 InnVestuhrr Thu, 05/24/2018 - 01:57 Permalink

ignorant of history, ignorant of facts?

one of the ways china's yuan is gaining credibility, is through the very large-scale purchasing of gold by its central bank.

china now has around 20,000 tonnes of gold, estimates range from 10,000 tons to 40,000 tonnes:

https://www.reuters.com/article/china-gold/china-proven-gold-reserves-a…

https://www.gold-eagle.com/could-china-actually-have-30000-tonnes-gold-…

this is well in excess of usa's official holdings of 8000 tonnes, which has not been audited in many decades, probably because it no longer exists and has been leased out or sold off to china.

china's star is rising, while usa's is falling; the flow of gold from west to east, is just evidence of that fact.

 

In reply to by InnVestuhrr