There is a lot to cover since my last article on gold, “Whoever Owns the Most Gold Wins,” published on May 31, and there is a “Perfect Storm” brewing that favors gold market fundamentals. I hope you did not chase the manipulation ghosts instead of gormandizing the news and charts during the last two weeks. Let us go right to the videotapes, then on to the charts. To view a larger version of any chart, right-click on it and choose your “view image” option.
- Western Banks Panicking – Russia Shoring Up Gold Reserves, Dumping Dollar – Russia 60 Minutes, May 26
- Why Central Banks Buy So Much Gold – Thomas Kaplan on Bloomberg, May 30
- Putin: Role Of Dollar Should Be Revisited In Global Trade – Russia Insight, Jun. 8
- Gold is setting up for a breakout years in the making – CNBC, Jun. 10
- Gold Is Paul Tudor Jones’s Favorite Trade for Next 12-24 Months – Bloomberg, Jun. 23
- Morgan Stanley index of U.S. economic strength collapses by the most ever – CNBC, Jun. 13
- Inflation Expectations Plunge To Record Lows – Zerohedge, Jun. 14
Here is the gold spot weekly chart as of Jun. 14, overlaid with the Commitments of Traders (Cot) data as of Jun. 11. Note that the CoT data is always delayed by one week. The CFTC’s Jun. 18 CoT data covering the previous week’s price action will be released on Friday, Jun. 21.
The purpose of this overlay is to help identify near-term price trends based on positioning by the Commercials (bullion banks) and Large Specs (hedge funds). Almost without exception, the Commercial traders build short positions during a rising price trend and Large Specs add long positions to capture the momo play. When the gold price is approaching an inflection point, their positioning begins to flip. Zoom in to the bottom of the chart and note the Jun. 11 data marked with red dots and see how the highs and lows of Open Interest (OI) marked with green dots do not determine gold’s price direction or highs and lows. I included the 50 Exponential Moving Average (EMA) and Falling Wedge for reference.
I posted several gold charts on a Twitter thread since May 31, but this one from Jun. 5 shows you all you need to know:
Gold weekly chart as of Jun. 14, 2019 close…
Excerpt from the Apr. 24 analysis:
“The StochRSI has dropped into extremely oversold territory and is due for an upside pivot at some point during the spring seasonality pattern. Volumes are falling through the pullback, indicative of a weakening downtrend.”
Excerpt from the May 31 analysis:
“A bullish Ascending Triangle is the long-term pattern that dominates the chart. Following the $1,346.75 high on Feb. 20, the gold price stopped dead in its tracks at the overhead 500 Simple Moving Average (SMA) and encountered lateral resistance from the extended price chop that occurred in early 2018. A bullish Falling Wedge formed since the Feb. high and its topside trendline was breached this morning with a bullish Long Day candlestick in response to a tariffs threat imposed upon Mexico…The 100 and 150 SMA provided support over the last two months and the 50/200 SMA Golden Cross has remained intact since early 2017. All of the moving averages except for the overhead 500 SMA are realigning back under the price action. The DMI-ADX remains in a positive stance and is beginning to reassert a bullish momentum. The StochRSI has returned to positive momentum with a pivot out of oversold territory.”
The tightening end of the Ascending Triangle has developed a confluence of patterns due to the breakout and rally from the bullish Falling Wedge, which includes an Inverse Head ‘n Shoulders and a Cup ‘n Handle. The 500 SMA overhead continues to be a stubborn resistance level for all weekly candlesticks since Jan. 2019. The DMI-ADX is showing a bullish Alligator Tongue setup and the StochRSI has just arrived at an overbought level. The volume has risen along with the price over the past month and a slightly lower print was seen this week. Despite all the studies appearing bullish, a Long Legged Doji candlestick closed out the week and is indicative of indecision.
The daily chart will add more color to how bullish the price action is or isn’t.
Excerpt from the Apr. 24 analysis:
“Gold held up extremely well this afternoon despite the USD rally, as the StochRSI is close to breaking out topside and telegraphing that the gold price is nearing an upside pivot.“I recommend a neutral near-term outlook until the topside trendline of the Falling Wedge and $1,300 are taken out with conviction. Spring is typically a bad time of the year to layer bullish positions due to seasonality patterns, but short-term speculative scalps and swings are possible in the volatility.”
Excerpt from the May 31 analysis:
“The price momentum through the Falling Wedge’s topside trendline and $1,300 included a bullish Closing Marubozu and an Opening Marubozu candlestick. The lower trendline drawn up from Aug. 2018 was never violated. All of the moving averages are realigning back under the price action and the 50/200 Exponential Moving Average (EMA) Golden Cross has remained intact since early 2019. The DMI-ADX has reverted to a positive stance, but the ADX has not caught up to signify powerful momentum due to the sudden upside move in price. The StochRSI has broken out to a bullish stance and into overbought territory and can remain up there for an extended time period. Volumes are rising, along with a rising price, which is indicative of a sustainable upside move. The next resistance level is $1,325 and must be taken out with conviction on both price and volume in order for $1,350 to be reached in short order, otherwise there will be a period of chop before the price can ascend higher. The chart is bullish in the near-term but must hold the $1,300 level without issue and conquer $1,325 easily for a sustained upside move toward $1,350.”
After printing a high of $1,358.19 in London at around 3am EDT today, the USD rallied and profits were taken in gold until the end of the trading day in New York. Gold closed for the week at $1,341.58. All of the moving averages are lined up with the stars, the DMI-ADX shows positive momentum with an Alligator Tongue, and the volume has risen steadily along with a rising price. The near-term negatives are that the StochRSI is looking like it may break down and the Spinning Top candlestick close is indicative of indecision.
The daily and weekly closing candlesticks are both indecisive indicators, and a definitive near-term call cannot be made until the next business day and week play out. Overall, both charts are in the bullish camp, but there may be some additional downside in price before the $1,360-$1,380 price levels are challenged.
Here is a link garden of articles to consider before closing up shop tonight.
- You Can Still Buy a House With Gold Bars in Vietnam – Bloomberg, May 27
- The Bond Market Gazes Into Future, Only Sees Pain – NY Magazine, May 30
- Global Yield Curves Blare Louder Alarms About Economic Prospects – Bloomberg, May 31
- ‘Gold is more stable’: Malaysia proposes pan-Asian bullion-backed currency – RT, May 31
- U.S. Officials Meet in Secret Over Junk-Loan Frenzy, Recession Alarms – TheStreet, Jun. 1
- Trump’s Currency War Plan Puts Treasury and Commerce at Odds – Bloomberg, Jun. 6
- The U.S. Created Just 75,000 Jobs in May, Much Worse Than Expected – Breitbart, Jun. 7
- Swiss Watchdog Closes Banks Probe Into Precious Metal Collusion – Reuters, Jun. 6
- White House is said to be vetting Judy Shelton for Fed board – Business Insider, Jun. 8
- Judy Shelton’s Remarkable Attack on the Fed – Mises Institute, Jun. 11
- Gold Prices Set to Skyrocket as Beijing Bets Big on Bullion – Sputnik, Jun. 10
- Battle of the elements: gold has gleamed through the ages – Physics World, Jun. 12
- Supply crunch fears drive iron ore to fresh 2019 high – FT, Jun. 13
- Russia‘s Gold & Currency Reserves Surpass $500 Billion Mark – Sputnik, Jun. 13
- Iran‘s Zarif Calls for ‘Elimination’ of Dollar to Stop US ‘Economic Terrorism’ – Sputnik,Jun. 14
- Bond king Jeffrey Gundlach bets on gold and potential recession – MarketWatch, Jun. 14
- Hong Kong’s Clout as a Global Financial Center Clouded by Uncertainty – WSJ, Jun. 14
- Moody’s cuts Turkey’s credit rating deeper into junk territory – FT, Jun. 14
- UK joins US in blaming Iran for oil tanker attacks – Washington Examiner, Jun. 14
Plan Your Trade, Trade Your Plan
TraderStef on Twitter