Gold Nearing Breakout Into Unprecedented Bullmarket…And The Latest COTs Won’t Stop It

June 14, 2019
Technical Analyst & Author

All the pieces are falling into place for the biggest gold bullmarket in history and by the look of the long-term gold chart, it is set to start very soon. The biggest reason of course is the accelerating demise of fiat. There are many other reasons that we will be considering going forward, but the one that looks set to trigger the immediate start of the bullmarket (and has already since the move of the past 2 weeks is viewed as the initial impulse wave of this bullmarket, even though it hasn’t broken out yet) is the Fed chickening out of its “normalization” program, which was a joke anyway because there is no way they can normalize the hopeless mess they have created. . The markets called the Fed’s bluff and they very quickly folded, establishing that they are now powerless.

A key point to make at this juncture is that the latest COTs for gold looked bearish because there was an explosion in Commercial short and Large Sec long positions to an at least 1-year peak, which many are taking to mean that gold will fail again at the big resistance at the upper boundary of its huge base pattern. But what may instead happen this time is that gold breaks out anyway, perhaps after backing off a little first, and rockets higher, with positions ballooning to well off the scale levels, which would hardly be surprising since if gold breaks out above $1400 a huge number of investors and traders will come down off the fence and pile in. When they have reached wild extremes on a spike, then we will see a correction or at least a consolidation before the next upwave starts. We have learnt from a mistake made early in 2016 when we called the end to the strong rally in progress then off the lows of the giant complex Head-and-Shoulders pattern too early due to high Commercial short and Large Sec long positions.

The main purpose of this update is to emphasize two crucial points. One is that the sharp rally in the Precious Metals over the past 2 weeks is considered to be the start of a “breakout drive” that will soon bust gold through the key resistance towards and at $1400, a development that will probably trigger a spectacular spike. The other is that the seemingly bearish looking COTs won’t stop it – there be a minor short-term reaction but other than that gold is looking set to blast higher soon. It’s hard to see how it wouldn’t with the Fed’s reversal to dropping rates set to rip the rug out from under the dollar, and the global move to dedollarize given added urgency by the recent spate of bullying and crude threats issued to the rest of the world from the US in the form of sanctions, tariffs and possible military. The US Neocons would do well to heed the old saying “People who live in glasshouses shouldn’t throw stones” – the key to neutralizing them is to dedollarize, collapse the dollar and starve the US military – industrial complex of the torrent of foreign funds that it depends on for its power. The rest of the world knows this and, after making sure that they are able to defend themselves militarily (in the case of the major powers), are taking steps to dump the dollar and push it off its perch. This of course will be a huge driver for gold, especially as most other currencies are also in a parlous state.

Let’s now quickly review the latest most pertinent charts.

Starting with the 10-year gold chart we see that it is at last in position to break out of its gigantic 6-year long base pattern, that may be described either as a complex Head-and-Shoulders base or as a Saucer. The sharp rally of the past 2 weeks is viewed as the probable start of a “breakout drive” out of the pattern, and it will not be stopped by the seemingly bearish COT even if that triggers a modest reaction (possible because June is not a seasonally good month for the Precious Metals). However, we should not be put off by this because any such dip will be like the side of a molehill compared to Mt Everest.

Click on chart to popup a larger, clearer version.

Since a dollar collapse will be a primary driver for gold, how does the dollar look? On its 10-year chart we can see that the rally of the past year or so caused by the Fed’s normalization program is fizzling out as the Fed has been backed into a corner (backed itself into a corner) and has been forced to capitulate. We are now on course for 0% interest rates or lower – think about it – what would you rather hold in a NIRP environment where banks help themselves to your cash via bail-ins, which is reality plunder, cash or gold that they can’t touch? – it’s a no-brainer.

Silver investments look most attractive at this time, as silver is still close to a rock bottom price and it tends to lag gold.

We will be expanding on the reasons for a massive bullmarket in the Precious Metals going forward.

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Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com

Seventy-five percent of all gold in circulation has been extracted since 1910

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