Title: Near Term Risk in Gold is Increasing

IMG Auteur
Published : August 13th, 2019
365 words - Reading time : 0 - 1 minutes
( 1 vote, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Technical Analysis

Jordan Roy-Byrne CMT, MFTA

Last week was another strong one for the precious metals sector. 

Gold gained a whopping $51/oz or 3.5%. The gold stocks (GDX, GDXJ) advanced by roughly 6%. Silver gained 4%.

Momentum in the sector began to build once Gold surpassed resistance at $1420-$1425/oz. We had noted the lack of resistance from $1425 to $1525-$1550/oz. 

Gold has not reached $1550/oz yet but as it inches higher, some technical and sentiment indicators are urging caution.

Gold’s net speculative position of 54% is very close to the peaks of 55% to 60% seen since 2000. It’s possible the commercial hedgers will start covering at somepoint like they did in 2006 and 2010 but for now we have to assume they won’t if $1550/oz holds as resistance.

Gold Weekly & Net Speculative Position

In the next chart we plot Gold’s net speculative position (51%) and the 21-day average of the daily sentiment index (DSI) from 2002 to 2011 (84%). 

During that strong 10-year period, those figures of 51% and 84% were reached seven times. Five of those seven times Gold corrected or consolidated for at least a few months.

Gold Daily, Net Speculative Position & Daily Sentiment Index

Turning to the gold stocks (and GDX specifically), we find a fairly overbought condition while the market approaches multi-year resistance at $31-$32. 

The bullish percentage index (BPGDM) and a 20-day moving average of new highs in GDX are approaching the levels they peaked at in July 2016. 

The trend in precious metals is strong and the fundamentals are bullish but there can obviously be corrections and consolidations within strong trends.

Sentiment indicators are becoming a concern and Gold and gold stocks (GDX) are approaching obvious resistance levels at $1550/oz and $31-$32. 

This is not the time to be placing aggressive bets on Gold or the senior gold stocks. If there is a sector correction, those areas figure to be hit harder than Silver or junior mining stocks which are not as extended.

If you missed the recent run then it is best to be patient, buy value and wait for weakness in anything that is strong but too extended. New opportunities will emerge.

Jordan Roy-Byrne CMT, MFTA

https://thedailygold.com


|
<< Previous article
Rate : Average note :5 (1 vote)
>> Next article
Jordan Roy-Byrne, CMT is a Chartered Market Technician and member of the Market Technicians Association. He is the publisher and editor of TheDailyGold Premium, a publication which emphasizes market timing and stock selection, as well as TheDailyGold Global, an add-on service for subscribers which covers global capital markets. He is also the author of the 2015 book, The Coming Renewal of Gold’s Secular Bull Market which is available for free. TheDailyGold.com was recently named one of the top 50 Investment Blogs by DailyReckoning and WalletHub.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Bank of England Warns of an ‘Abrupt’ Financial Collapse Due To Clim...
18 OctThemis1
A cynical attempt on Carney's part to deflect the blame for the coming financial crisis. The central banks must shoulder the majority of the culpa...
Bank of England Warns of an ‘Abrupt’ Financial Collapse Due To Clim...
16 OctS W.0
What a load of nonsense from Carney, Likely there will be a crash but to blame it on the climate is ...nonsense I am wondering if he has re...
A Hard Rain
09 Octcarlomar0
Bravo! The best analysis of what is going on! I read your column faithfully and always find new thoughts and valuable ideas in your writing!
Juniors ? The Butterflies in the Animal Farm of the investing world ?
07 Octstocking up pennies
Very well written article, Alan. It pictures the volatibility of the junior stocks, that are, indeed, mostly comparable to ''social butterflies'' a...
We Are Very Confident In $1,700 Gold Before The Muppets Awaken
08 OctThemis
You are correct regarding spelling but is it necessary to be pedantic about it? Surely the content of the article is more important?
A Hard Rain
08 OctThemis2
I agree with every word. Keep telling it as you see it. People are so close to the issues that they need a commentator like you to stand back and...
We Are Very Confident In $1,700 Gold Before The Muppets Awaken
02 OctLouis Solomons
There is no such word as commentairies.
We Are Very Confident In $1,700 Gold Before The Muppets Awaken
02 OctLouis Solomons
Uncharted and unchartered are different words.
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS