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Gold is once again at the magical $1000 threshold. It was just a few months ago that I talked about the precious metal and mentioned that I spied the sign of a gold top. That was in early June when gold was trading at $980. That was a great call because into early July gold fell to $905.
Here are various perspectives on gold’s current technical outlook and at the end, my own take:
On August 6th, in a video titled “Has the bull move in Gold finally arrived?” Adam from MarketClub explains why he was (correctly) bullish. At that time, gold was trading at around $965. It dipped slightly in the following weeks and then pierced the psychologically important $1000 line in the sand.
In a more recent video, Adam asks, “Is this the move we have been waiting for?“. To find out what he thinks now, click the link or graphic to watch the video:
He shows a long term chart of gold and talks about “energy fields” on the chart. This is Adam’s name for what most others call periods of contraction in price range, which often precede periods of expansion in price range.
Adam’s got a ‘hot hand’ right now in gold as he’s been correctly calling the direction for some time. To learn more about his approach, here’s a short introduction to MarketClub Alerts. Besides all the great material they offer, what I like about MarketClub is that they stand behind their product with a 100% no questions asked money back guarantee. That’s the touchstone of a reputable and solid outfit.
Carl Swenlin’s recent commentary on gold is also bullish:
We are on a buy signal for gold, and the chart is bullish, so we should assume that the outcome will be bullish; however, note that the resistance in this area has been quite stubborn for almost two years.
He takes issue at what many are calling a head and shoulder pattern formation, saying that “reverse head and shoulders patterns belong at bottoms, while head and shoulders patterns belong at tops”. That may be true most of the time. But as I’ve mentioned before, head and shoulder patterns are not always reversal patterns. They can also be continuation patterns at times.
The Hulbert Gold Newsletter Sentiment Index (HGNSI) which measures a sub-set of newsletters which try to time the gold market is 39.5%. This means that the average newsletter is telling their clients to be long gold with 39.5% of their portfolio.
To put that in perspective, on October 15th, 2002 the HGNSI was at -21.15% and in January 3rd, 2003 it was +69.23%. Its mid-range is about +30% and its all time high was 89.58% reached in early 2002. Here you can see the corresponding readings for HGNSI at each attempt to breach the $1000 level.
MarketVane’s Bullish Consensus sentiment indicator for gold stands at 86%. While that is high, previous history for this indicator shows that it is possible for it to stay elevated as gold prices ramp higher. That’s what we saw in early 2008 when gold approached the $1000 range for the first time.
Indian Wedding Season
Believe it or not, there is a ’season’ for weddings in India. It starts in October and goes until March. Right now, they are gearing up for this year’s season and the gold purchases are brisk. India’s appetite for gold, especially during the all important wedding season is impressive any given year. But the fact they are willing to be such large buyers at these prices provides support to the gold price.
Commitments of Traders Report
The latest CoT report from the CFTC shows a lopsided market with large speculators heavily long. Small speculators are also leaning the same way with about 3 times as many long as short the yellow metal (66,781 vs. 20,660).
Based on the technicals and sentiment, I wouldn’t be surprised if gold rested right at the $1000 level before launching higher. That could look very elegant with a tight contraction or it may thrash about in a wide range. Either way, I’m hesitant to jump on the bullish bandwagon right now.
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