Spot Chart | Analysts are misreading the Dow/Gold chart and what it means for ... | News2Gold

Analysts are misreading the Dow/Gold chart and what it means for ...
Trader Dan's Market Views: Weekly Gold Chart
CHART: So far so good on the 3-year gold, silver stocks rule ...

Analysts are misreading the Dow/Gold chart and what it means for ...

Posted: 23 Apr 2014 08:56 PM PDT

Posted on 24 April 2014 with no comments from readers

Take a look at the Chart of the Day below that shows the ratio between the Dow Jones Index and the price of gold. Analysts have drawn a rather distorted looking trend line channel showing a break-out to the upside. That would seem to indicate higher stock market prices and a lower gold price.

However, if instead you continue the downward trend line to the top of the recent high then you still get the classic bell-shaped curve beloved by hedge funds and other chartists. This would clearly indicate a long-term reversal to the mean will continue in the Dow/Gold, perhaps with quite a dramatic correction to the downside. So the Dow Jones would fall and gold prices rise.

Bell-curve or not?

Does this graph look like a bell-shape or it is broken? We see a distortion caused by an unsustainable spike in share prices last year and the impact of Indian taxes on the gold market.

If that is true then the clever thing to be doing would be to accumulate gold at current prices and sell stocks. That's the reverse of the consensus view now but when was the consensus ever a good guide?

Posted on 24 April 2014 Categories: Gold & Silver

Trader Dan's Market Views: Weekly Gold Chart

Posted: 19 Apr 2014 10:19 AM PDT

I wanted to take just a short bit of time between firing up the pit smoker and throwing some bovine flesh upon it to put up a quick chart of gold for the readers.

As I mentioned on Thursday, gold is totally at the mercy of events in Ukraine for the time being.

You can see on the chart that the metal has been range bound for some time now ( about one year ). Please keep this is mind when you read more breathless talk about gold being poised for a big move "any time now". How many of these "any time now's" have we read over the last year? Whether it is the GOFO talk or backwardation talk or "Russia is going to dump the Dollar" talk, or whatever.

Technically not a single one of these premises, or others not listed, have changed the technical posture of this market for a year. If and only if the price breaks out of this range, can we say with certainty that the market has become concerned with these things. For now, it could care less and thus neither should we.

The green rectangle defines the range which is near $1400 on the top side and just below $1200 on the bottom side for a range of some $200. Just last month ( March ) the price had rallied up to the top of the range only to meet with selling. That pushed it back down with it looking likely that it was headed down towards $1200 once more. However, events flared up in Ukraine and gold received some strong bids due to safe haven flows. Those bids came in near $1280.

The circumstances due to these geopolitical concerns have created a new and higher bottom at the $1280 level. However, gold has been unable to push past $1320 for any length of time. That has carved out a new range within the broader range. This is marked on the chart as "Tighter Trading Range".

These two levels are our new boundaries which are confining the price for the time being. If the market senses any lessening of tensions in Ukraine, chances are that $1280 will not hold on the bottom. If not, there is a band of congestion between $1260 - $1240 that will draw it like a magnet should it fail. There is little support between $1240 and $1200 meaning that if $1240 were to fail, $1200 will be tested.

On the upside, only a breach of $1320 would give the bulls the needed impetus to make a run to $1350.

If events in Ukraine fade from traders' minds, the focus will shift back to US economic data with participants looking for clues to the Fed's future actions on in US interest rate front. Any improvements on the jobs front will immediately fan the flames of higher interest rates next spring, which the market continues to waver back and forth on. Higher rates will pressure gold as it should support the US Dollar. Again, we do not know what the economic data will look like and thus that leaves the markets very susceptible to sudden and sharp price swings either way as price responds to changes in expectations or sentiment along those lines.

Lastly, here is the current Commitment of Traders data viewed in chart form as to the positioning of the large hedge funds in comparison to the price of the metal.

There was a rather large shift this week in the positioning of the hedgies as they were both liquidating stale longs and adding new shorts. The combination dropped their current net long position by some 8000 contracts or so. This is the reason for my concern if the $1280 level does not hold - there will be a significant amount of long liquidation among this category of traders if it does not.

In another interesting development, the small traders, the general public, were selling gold this past week as well. Is the bloom coming off the metal for this category? They are net long still but this is the least bullish they have been in five weeks. Sentiment could be changing in the speculative community and that will bear close monitoring.

Happy Easter.

CHART: So far so good on the 3-year gold, silver stocks rule ...

Posted: 23 Apr 2014 04:03 PM PDT

The price of gold has lost a third of its value since hitting all-time highs in 2011.

2013 was particularly brutal with the metal declining 28%; its worst performance in a decade.

The last three years have been even more devastating for gold stocks.

From 2011 through 2013, the NYSE Arca Gold Miners, the FTSE Gold Mines, and the Philadelphia Gold & Silver Indices all declined more than 60%.

Back in February, the boutique investment firm US Global Investors released a report that warned that "ditching this sector may not be the best action to take in 2014".

The reason, as their chart shows, was that precious metals miners were approaching "the historical limits of multi-year declines".

While these stocks "have a history of higher volatility compared to the overall US market, consecutive periods of declines are rare.

So far US Global Investors' view has been borne out and the Philadelphia Gold & Silver Index (INDEXNASDAQ:XAU) has managed double digit gains even as gold and silver's 2014 rallies begin to fade:

Spot Chart | Analysts are misreading the Dow/Gold chart and what it means for ... | News2Gold

Spot Chart | Analysts are misreading the Dow/<b>Gold chart</b> and what it means for <b>...</b> | News2Gold

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