Gold News

Wrong Gold Bugs, No Right Answer

Conflicting signals means traders have no clear direction in gold right now...
 
"THERE are worse things that could happen than filling a gap and scattering the wrong kind of gold bugs back out," Gary Tanashian wrote to his Notes from the Rabbit Hole subscribers last week.
 
"Then it would be up to the longer-term charts to do the heavy lifting if the daily does fulfill this downside potential."
 
Well, the gap was filled, the top end of the anticipated support zone was reached and indeed, the wrong (ie, momentum players) kind of gold bugs are scattering back out. The hard sell down on Thursday was very likely due in large part to the selling by traders with a fetish about gold as a geopolitical or terror hedge.
 
We should continue to tune out these people and while we are at it, tune out the 'Indian wedding season' and 'China demand' pumpers in favor of real fundamentals like gold's relationship to commodities and the stock market, the Banking sector's relationship to the broad market, Junk Bond to Quality credit spreads and US Treasury bond yield relationships.
 
It's boring stuff compared to all that demand in China, Modi's pro-gold regime in India and of course how we are all going to go down the drain amidst war, terror and an age of global conflict unless we have a 'crisis hedge'. The only terror gold investors should care about is that perpetrated upon paper/digital currencies by global policy makers.
 
So last week was good in that it blew out those who were hanging on through the 2-month long grind that did indeed turn out to be short-term topping patterns. I don't mind telling you that my patience was tested by the bullish spirits, especially on up days with Ukraine in the headlines. I did not think it would take 2 months to resolve, but every time the sector looked like it would crack, a new geopolitical flashpoint would show up in the mainstream financial media.
 
That condition is now being closed out. Taking its place could be a bottom of at least short-term significance (i.e. to a bounce). We have a fundamental backdrop that is not fully formed and a big picture technical backdrop that has degraded in gold and silver and is not proven in the equities. So whether we bounce only, go bullish for an extended rally or even bull market, or (and it's still on the table folks) fail into the 'final plunge' scenario, we are dealing in potentials, not confirmed trends.
 
Okay, Mark Hulbert's index of gold tip trading services is on board the contrary theme. That only reinforces matters.
 
Gold trend followers are now hyper bearish, which is good because this is one sector you buy when it is reviled, not cheered for. But let's also keep in mind the reason why said trend followers lurched bearish; a very real technical breakdown per this overly simplified chart of a Symmetrical Triangle breakdown. That's what's got everyone freaked out.

 

Gary Tanashian successfully owned and operated a progressive medical component manufacturing company for 21 years, through various economic cycles. This experience gave Gary an understanding of and appreciation for global macroeconomics as it relates to individual markets and sectors. Along the way, Gary developed an almost geek-like interest in technical analysis (TA), to add to a long-time interest in human psychology. Various unique macro market ratio indicators were also added to the mix, with the result being a financial market newsletter, Notes From the Rabbit Hole (NFTRH) that combines these attributes.

See the full archive of Gary Tanashian.

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