Buying Time?

January 22, 2005

Strategic positioning is all about being where the puck is going to be.

Has gold bottomed here?

Well, the MACD on the chart below (courtesy stockcharts.com) is looking good

And the horizontal count downside target arising from the breakdown on January 3rd has been reached (within the context of a rising trend)

And the $XAU has just broken up (chart courtesy Decisionpoint.com)

Unfortunately, the longer term charts are less compelling, with the PMO showing falling tops:

However, here are a couple of straws in the wind:

The following chart shows that $XAU relative to gold may be bottoming. Note the non-confirmation of price and MACD

Then there is the following observation - recently made by Mr Ted Butler in his January 18th commentary: (Source: http://www.investmentrarities.com/weeklycommentary.html)

"From the top (the COT of December 7), the dealers have covered 100,000 net short gold futures contracts and 37,000 net short silver futures contracts (even more if options are included). That's another way of saying the tech funds liquidated 100,000 long gold futures contracts and 37,000 silver contracts. In ounces, that's the equivalent of 10 million gold ounces and 185 million silver ounces. That's far more silver than exists in total world known bullion inventories. It was this technical fund selling that caused gold to sell off $40 and silver $1.50+.

Now that the technical fund selling/dealer short covering appears complete, most of the risk has been removed from the market. The all-clear signal has been given. We are now at one of those rare points when there is no obvious reason to defer purchase."

On balance, there is an argument to support a rise in both gold and gold shares in the short-medium term, but the following chart is still showing evidence that gold is not yet being perceived as anything other than a commodity.

But the optimists amongst us will argue that things are about to get interesting, based on the following daily charts

 

A single ounce of gold (about 28 grams) can be stretched into a gold thread 5 miles (8 kilometers) long.