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http://www.clivemaund.com/gmu.php?art_id=68&date=2014-09-29
[MAUND’S main contention rests on O.S. conditions and extreme pessimism–these are not enuff to turn a mkt but could precipitate a tradable bounce–After todays plunge in crude, I dunno how cavalier I’d be about taking a long stab–cause PM technicals are god-awful…but I might–this article is quite good though–DYOD]
Gold Market Update
originally published September 29th, 2014
the dollar hedgers chart (COT) shows that positions are already at record extremes – this chart calls for a reversal, and very soon.
Gold Hedgers chart shown below, which is a kind of COT chart and goes back further, makes plain that from the standpoint of traders’ positions we are now well into bullish territory – readings above the green line are bullish, and we can see that it is now well above this line, and in the past readings such as this have lead to significant rallies, with a similar reading in 2008 leading to an enormous rally. Looks good.
Chart courtesy of www.sentimentrader.com
The Gold Optix (optimism) chart below makes fascinating viewing as it displays the current all-pervasive pessimism towards gold in graphical form. This chart makes plain that we are close to record pessimism, and thus it can be concluded that we are either at, or very close to a bottom.
The whole world is optimistic on the dollar now, probably up to and including IS, which is understandable considering how many greenbacks they have robbed from banks, and sentiment towards it is at wild “off the scale” bullish extremes. For this reason, a correction in the dollar looks imminent, even if it later continues higher for a while, and if it is gold and silver should turn higher. Let’s now review the evidence.First, the long-term 11-year chart for the dollar index shows the runup of recent weeks in the context of prior pattern development, and while the runup so far doesn’t look all that big historically speaking, it has arrived at a twin target and is critically overbought on its RSI indicator.
The 4-year chart shows to advantage the dramatic spike in the dollar index, which has resulted in it arriving at the target shown in a wildly overbought state. Thus it is now vulnerable to a sudden reversal.
Meanwhile, the dollar optix or optimism index chart shows that optimism also is already at record extremes and is “off the scale”The record shows that such wild optix index extremes have almost always coincided with a top or closely preceded it.
Conclusion: we can now emphatically conclude that gold is believed to be either at or very close to an important low here, especially as the dollar looks set to turn lower soon. Only in the event of an immediate all-out across the board deflationary plunge would gold prices be likely to drop further.
End of update.