Precious metals expert Michael Ballanger charts recent moves in the gold market and sees a rally in the making.
Last week I felt that IF gold broke $1,180, it could see another $140 downside, taking it to the December 2015 lows of around $1,045. I also saw that the Relative Strength Index (RSI) was at the extremely low levels usually associated with bottoms.
However, a blatant intervention/liquidation occurred last Thursday at exactly 8 p.m. EST, and more importantly, 9 a.m. Friday Beijing time, whereby a massive order executed into a ridiculously thin Globex market on U.S. Thanksgiving took the gold price down through that $1,180 support, before it turned at $1,172.80. As of 11:30 a.m. EST Friday, gold was back to $1,182.85, after rallying all the way to $1,195 very early Friday morning. Friday’s Crimex close will be a battle, but an “up” day will do wonders for the thoroughly demoralized gold and silver markets.
The fact that the gold market recovered so quickly confirms that demand is definitely alive and well, and that the RSI in the low 20s is strongly hinting at a short-term bottom for the precious metals. In fact, in closing out the week above $1,180, gold held critical support, which would be the best tape action in over three months.
The VanEck Vectors Junior Gold Miners ETF (GDXJ) should be due for a tradable rebound and a possible intermediate-term bottom, as sentiment for the juniors has evaporated to “black bearish” once again. While not quite as severe as on Jan. 19, 2016, it has really eroded since the highs in July.
Finally, as for sentiment, I lifted a couple of charts from the Zerohedge website (which are actually compliments of Bloomberg) that show the last three times the gold options “skews” were this bearish were in November 2014, July 2015 …read more