Gold is approahing an important low and I see two potential scenarios.
Scenario 1) Prices formed 6-month lows on Tuesday, and a new rally is just getting started.
Scenario 2) This is just a 3-5 day bounce and prices will rollover and bottom within a week or two.
The COT for gold is neutral to mildly bullish with 311,607 commercial shorts. I prefer to see commercials below 300,000 before recommending a 6-month low.
The COT for silver remains bullish. Large speculators are net short 7,196 contracts, and commercial shorts are below 90,000 contracts.
To support a low last Tuesday, gold would have to close above $1317.40 (form a swing low) and then close progressively above the 10-day EMA. Until that occurs, I’ll maintain the bounce scenario. We should know which scenario to follow sometime next week.
The last 18-months have been challenging for metals investors. It’s difficult to earn profits consistently when prices are rangebound. I appreciate your loyalty and believe your perseverance will be rewarded.
Gold should decisively breakout above $1400 during the next advance and establish a clear uptrend. Silver and miners should do exceedingly well once this bottom is set.
-US DOLLAR- The dollar is overbought and up against stiff resistance. Closing below 92.19 would from a swing high and possible top.
-GOLD WEEKLY- Gold is approaching a 6-month low. Prices should bottom between now and mid-May. The next 6-month cycle should rally and finally breakout above the long-term green trendline.
-GOLD- The 6-Month cycles have averaged 104-trading days between lows. Two standard deviations suggest a timing window between 94 – 112 trading days. Friday marked the 98th day of this cycle, so a low is possible.
However, other indicators (force index & RSI) are yet to reach levels characteristic of a low. Consequently, we favor a little more downside and buying opportunity within a week or two. Progressive white candle closes above the 10-day EMA would raise the potential for a bottom last Tuesday at $1302.30.
-SILVER WEEKLY- The COT remains bullish. Large speculators are net short 7,196 contrasts, and commercial shorts are in a bullish configuration. The 6-month cycle may have bottomed last week. If not, then prices should bottom within a week or two.
Prices formed a weekly reversal candle after testing support at $16.10. The COT is bullish, and a low is feasible. However, a decline back to $15.65 remains plausible.
-SILVER- Prices formed a swing low and closed above the 10-day EMA. A 6-month low is possible. However, indicators remain above oversold levels that typically signal a bottom. We favor a decline below $16.00 and cycle low within a week or two. Progressive closes above the 200-day MA ($16.80) would sponsor a bottom and a subsequent buy signal.
-HUI:GOLD RATIO- Consecutive closes above .1405 would imply a 6-month low. Breaking the trendline would support a 1-2 week decline.
-GDX- Volume is declining, and we are treating this as a bounce. A breakout above .1405 in the HUI:GOLD ratio and GDX closing above $23.15 would recommend a bottom and subsequent buy signal. Otherwise, we expect a cycle bottom within a week or two.
-GDXJ- If this is just a bounce, then juniors should rollover and decline below the trendline in the next week or two. I’ll consider a bottom if volume picks up and prices close progressively above $34.00.
-SPY- Stocks bounced off critical support at the 200-day MA and rallied sharply on Friday. The 200-day is extremely important. Breaking below it would likely trigger a selling event. Stocks would have to close above the April 271.30 high to recommend a rally.
-WTIC- Oil and the stock market have been positively correlated. The next 39-41 day cycle arrives May 23 (+/- 1-day). Oil would have to break lower and close below $66.50 to support a decline into May 23rd. Otherwise, May 23rd will likely mark another short-term top. A breakdown in oil would presumably harmonize with a decline in SPY below its 200-day MA.
We are in the timing band for a 6-month low, but most indicators haven’t reached levels consistent with a low. I’ll monitor the structure closely and update as needed. If gold establishes scenario one, I’ll change the color codes and enter long positions.
Have a wonderful weekend.