econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 07 March 2016

Gold Correction Likely

Written by

Special Report: The Coming Correction In Gold and Gold Stocks

I recommended buying the gold ETF (GLD) and the gold stock ETF (GDX) on December 30. In the Gold Update on February 5 I said,

"Sometime in 2016, GDX has the potential to trade above $20.00, so let that be a guide in terms of how aggressive you want to trade."

gold.bars.999

In my monthly commentary Macro Tides, which was published late February, I noted that GDX had traded as high as $19.85 on February 24, and gold had traded up to $1,263.90 on February 11. I thought it was likely that gold and GDX would exceed these price levels before a more meaningful correction developed.

Image

On Friday March 4, gold did exceed its high of $1,263.90, trading up to $1,280.70. GDX traded up $20.87, before reversing and ending the day down .55%. Despite the higher prices there are negative momentum divergences, which means the upside momentum is beginning to wane. This is usually a warning sign of an impending high in prices.

According to the Commitment of Traders report as of March 1, the trend following 'dumb' money is almost as long gold as it was last October, just before gold dropped from $1,180 to under $1,080 in less than five weeks. Large speculators were long 152,413 contracts in the March 1 report compared to being long 157, 434 contracts last October. More importantly, the 'smart' money, producers and the commercials, increased their short positions, and are now more short than they were last October. (producers -112,667 contracts vs. -102,946, commercials -171,431 contracts vs. -165,848) Since gold subsequently rallied from $1,240 to $1,280 after this report was tabulated on March 1, I would guess the smart money increased their short positions as gold rallied.

Image

The loss of upside momentum, the price patterns in gold and GDX, which indicate that a 5 wave rally may have completed, and the positioning of the smart and dumb money in the futures market suggest that gold and the gold stocks are near an intermediate high.

End of the Bear Market but Expect a Retrenchment Lower from Here

That's the bad news. The good news is the strength exhibited by gold and the gold stocks strongly suggests that the bear market from the highs in September 2011 is over. The recent rally represents the first leg of a new bull market, which may have ended at $1,280. A correction of 50% or more of the rally from the low of $1,046 is probable during the next few months, before the next phase of the new bull market in gold and gold stocks kicks into gear. In other words, gold and gold stocks may endure a correction of the recent large rally, with gold falling back to $1,160 - 1,180, and GDP dropping below $17.00. The coming correction will shake out the weak hands that jumped on the band wagon in the last few weeks. And if, as I expect, the dollar index does rally to a new high in coming months, it would likely pressure gold, especially after such a huge rally.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Metals Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Precious Metals


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Is Free Trade Harming the Economy?
Bank of England Endorses Post-Keynesian Endogenous Money Theory
News Blog
The Age Of The Employee-less Employer
Projected Costs Of U.S. Nuclear Forces, 2017 To 2026
63.4% Homeownership Rate In 2016 Was Lowest Since 1966
The Homeownership Gap Is Finally Closing - Part Four Of Five
Infographic Of The Day: The Best And Worst Financial Decisions People Make
Early Headlines: Asia Stocks Mixed, Oil Mixed, Dollar Up, Gold Down, Microsoft Growth, US Cities' Homicides Up, Battery Age, Higher-Priced Carbon, Sweden Crime Data, Russia Passes Saudi Arabia And More
February 20, 2017 Weather and Climate Report - Transition to Spring can be Cruel
More Buck For The Chuck
More About What's Going On In Retail
Your Dog Has A Better Memory Than A Chimpanzee
Where Shadow Economies Are Well Established
What We Read Today 20 February 2017
Successful SpaceX Launch &amp; Landing Of Falcon 9 + Dragon CRS-10 Mission To The ISS (2017-02-19)
Investing Blog
Market And Sector Analysis 19 February 2017
Dollar Looks To Head Higher
Opinion Blog
Fascism Defined And Described By Oswald Mosley
Charity Is Not How We Solve Poverty
Precious Metals Blog
Deflation And Gold: A Contrarian View
Live Markets
21Feb2017 Pre-Market Commentary: Wall Street To Open Higher, Crude Prices And The US Dollar Both Rise, Investors Remain Bullish For The Time Being
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government





























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved