Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Being Driven Higher by Speculation Not Real Physical Demand

Commodities / Gold & Silver 2009 Dec 22, 2009 - 12:36 PM GMT

By: Graham_Summers

Commodities

Best Financial Markets Analysis ArticleOver the last two days, we’ve looked at the current Gold bull market from historical and supply/ demand perspectives. Thus far, the data has lead us to believe that Gold has entered a speculative “mini-bubble” phase in bull market.

This scenario can of course change at any time should the public’s demand for physical bullion pick up again. However, until that occurs, Gold is in the same phase that Oil was in 2008: a speculative market in which sharp rallies or corrections can occur at any time.


With that in mind, today we’re looking at Gold from a technical analysis perspective to get some insights into where the precious metal is heading in the near future.

Back in early November, I wrote that Gold’s latest rise was largely on the back of Dollar devaluation. One of the primary reasons I wrote this was because the precious metal had failed to hit new highs against other major currencies.

That situation has since changed. Gold has hit a new high against the Euro:

The Japanese Yen:

And the Swiss Franc:

However, as it did this, Gold became extremely over-extended from its 50-, 200-, and 340-DMAs. Indeed, by the time Gold had broken to new highs against other major currencies, it was due for a serious correction.

Bill King of the King Report notes that previously, any time Gold rose 40% above its 340-DMA, it suffered a steep decline soon after. King writes:

Gold got 40% above its 350-day moving average on May 15, 2006; it fell from 720 to 542 in one month. Gold also got 40% above its key moving average on 3/17/08; it declined from 1032 to 682 by 10/24/08.

At the beginning of December 2009, Gold (priced in Dollars) was 34% above its 340-DMA. So it wasn’t quite at the 40% level seen in March ’06 or March ’08, but it was getting close.

Sure enough, soon after this, Gold staged a serious correction, falling to test its 50-DMA in a few weeks. As an aside, I’d like to point out that this sudden reversal is typical of markets driven by speculation.

So what’s next?

Well, first of all, Gold looks to have bounced before it even hit its 50-DMA. This is extremely positive from a momentum standpoint since Gold didn’t even fully fall to test the 50-DMA.

The culprit for this sudden correction? A sharp Dollar reversal and rally:

As you can see, the Dollar has broken its 50-DMA with no problem and is now facing resistance at 77. This marks a break in the Dollar’s nine-month downtrend. As such it is a MAJOR reversal (as confirmed by the break above the 50-DMA) and likely the beginning of an sustained uptrend in the Dollar.

Thus, all eyes should be on how Gold performs in the next few weeks. As noted before, Gold has thus far managed to avoid a full test of its 50-DMA. However, this could easily change as the Dollar rally gains momentum. IF Gold breaks below the 50-DMA then the next lines of support are $1,050, $1,025, $1,000 and finally the 200-DMA ($983). I’ve drawn them in below.

This wraps up our analysis of Gold for this week. All in all the main points to take away are:

  1. Gold is currently being driven by speculation (not real physical demand), as such, it is prone to sharp rallies AND reversals.
  2. Gold has hit new highs against non-Dollar major world currencies which is indicative of a flight from paper currency in general as opposed to Dollar devaluation.
  3. Gold has entered a sharp corrective phase but has thus far has managed to remain above its 50-DMA despite the Dollar rallying sharply. This indicates that the upward momentum is still VERY strong.

The issue now is how Gold performs as the Dollar rally intensifies. If Gold remains ABOVE its 50-DMA then we’re looking towards bigger gains in the near-term. However, if Gold DOESN’T stay above 50-DMA, then we’re likely going to see a test of $1,050 or $1,025. Indeed, Gold could even test its 200-DMA ($983) and STILL be in a bull market.

Again, keep your eyes on Gold in relation to the Dollar.

I’ve put together a FREE Special Report detailing an unusual means of playing the gold explosion. While most investors blindly pile into the gold ETF or buy gold bullion, this backdoor play allows you to buy the precious metal at an incredible $188 an ounce. As the gold speculative bubble explodes higher in the coming years, this investment offers the potential for triple digit gains.

Swing by www.gainspainscapital.com/gold.html to pick up your FREE copy!!

Good Investing!

Graham Summers

http://gainspainscapital.com

Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. 

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

    © 2009 Copyright Graham Summers - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules