Oil is now very close to breaking out from the large Head-and-Shoulders bottom that we had earlier identified, and from the look of the latest oil COT chart, on which the Commercials short positions have shrunk dramatically, it is close to doing so – and if it does it will be on its way to $80 minimum. Needless to say this will be inflationary, and thus bullish for Precious Metals. Should this breakout occur, it will radically improve the outlook for gold and silver.

Gold Market Update - Crude Oil Breakout Inflationary for Precious Metals

On the 6-month gold chart we can see that although gold has continued to decline over the past week or so, its rate of descent has slowed, so that a potential bullish Falling Wedge has appeared on the chart. In addition, short-term oscillators, shown at the top and bottom of the chart, are near their normal oversold limits, so there is certainly scope for a rally. Probably what we will now see is a strong rally from here followed by a reaction next month into the seasonal low period, before the advance resumes in earnest.

Finally a “V for Victory” intraday reversal appeared on the gold chart yesterday, providing additional evidence of a turnaround. While too much should not be read into the appearance of this Churchillian indication, viewed in conjunction with other indications it is a positive sign.

To the writer's knowledge, the V for Victory reversal was first spotted on the silver chart by Barb Moriarty of 321gold back in 2004, this sighting being reproduced below…

By Clive Maund
CliveMaund.com

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

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