Friday, December 30, 2016
Time To Be Constructive on Gold Prices
I am constructive here after having been bearish since May. I believe there is now better footing to construct a longer lasting and impressive advance in gold.
The bearish impulse that followed the Trump inauguration finally resulted in some position squaring that had earlier been absent in the decline from the July peak price.
There were some striking technical developments in the declining gold price action following the election, including 12 new unchecked lows and a smart bearish channel trend. The channel that prices followed has been broken and yesterday’s advance seems to confirm the significance of that break. Open interest rose 12K yesterday, showing further bullish resolve. It has been since early November that gold had such an impressive jump in open interest.
Yesterday I saw a blurb (article) about gold being up because Trump/Russia uncertainty, bla, bla, bla. I expect we will see a lot more similar articles and also some about how other conclusions were too readily embraced. I do suspect that a bullish gold advance will have to overcome a strong dollar this year, but see signs that indicate the dollar (DXY) could easily and rather soon move back to 98.00 from low 102’s now and a recent high of 103.63 two days ago.
Soros was fairly vocal (after the fact) both about his early year bullish gold position and later in September in his position reduction/elimination. However, I suspect (without evidence other than reading a book he wrote and following some of his trading strategies) that he has been buying into declining prices. A long anticipated declines in bullish gold positioning has finally left me comfortable suggesting/establishing bullish gold positioning strategies. The resiliency of a large faction of bullish participants throughout the retracement of much of the price gains from the first half of the year suggests there are lasting and extraordinary gold price gains are forthcoming.
In any event, I expect there is a good chance that even without earlier noted bearish objectives being reached in the 1090’s and low 1100’s (bear flag and bearish head and shoulders), we have begun a bullish advance that will last years and thousands of dollars.
For guide, spot gold trades at 1157 last.
All the best in 2017, mm