Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

June 25, 2019 | Is Gold About To Get Whacked?

John is author or co-author of five books, including of The Money Bubble, The Collapse of the Dollar and How to Profit From It, Clean Money: Picking Winners in the Green-Tech Boom and How to Profit from the Coming Real Estate Bust. A former Wall Street analyst and featured columnist with TheStreet.com, he currently writes for CFA Magazine.

Gold has spent the past couple of weeks steamrolling technical barriers and reviving the spirits of long-suffering gold bugs.

But markets don’t move in a straight line. Bull runs (if that’s what this is) have stomach-churning corrections along the way – usually just as everyone concludes that the good times will roll on forever.

321gold’s Bob Moriarty, a consistent voice of reason in the precious metals space, explained this to his readers yesterday:

Gold bulls are coming out of hibernation with even billionaires talking about how much they like gold. That tends to happen just before a correction. The gold bulls get frothy around the mouth; speculators pour money into gold contracts just in time to get whacked once more so they can whine about how gold and silver are manipulated and no one saw it coming.

I’ve written a number of times about the importance of understanding bullish sentiment. I find the DSI of Jake Bernstein the single most valuable indicator I use. On both Thursday and Friday last, the DSI for gold hit 94. That doesn’t suggest a major high marking a top for the next 200 years but it does say caution would be merited. Too many people turned bullish all of a sudden.

The COTs agree. Gold sentiment is excessive.

Speaking of the COTs (which show the structure of the gold futures market), they are indeed excessive. The past few weeks have seen an epic buildup of speculator longs and commercial shorts:

Gold COT gold whacked

Here’s the same data in graphical form, with the speculators in gray and the commercials in red:

Gold COT chart gold whacked

Since the speculators are usually wrong at big turning points and the commercials are usually right, the paper market set-up is extremely bearish. As Moriarty says, this doesn’t mean an end to the bull market, but it might mean a several-week-long pause.

As for how to play this kind of squiggle, that’s easy. Keep doing what you should have been doing all along, which is dollar-cost-averaging into gold and silver bullion and well-chosen mining stocks. The fundamentals that will eventually drive precious metals and other real assets higher will continue their long march towards an era-ending financial crisis. And gold will track this evolution — with the occasional correction.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

June 25th, 2019

Posted In: Dollar Collapse.com

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.