Strong Headwinds Ahead for Gold!

Wednesday, March 30, 2016

gold forecast I envision reasons to be extremely cautious within the short term (approximately, 5 to 15 days). Gold is now close to its resistance, which will make further upside progress very difficult to achieve at this point.  It is now registering its sixth week in overbought territory.  Finally, coming from an overbought area, any rolling over to the downside may prove to be significant.

Sometimes, the markets give mixed signals and it becomes very difficult to understand the message as seen on the charts. These are the times during which my readers should be alerted so that they are able to take the correct measures.

Yesterday, on Tuesday, Mach 29th, 2016, Chairwoman Dr. Yellen's decision to return to her dovish views surprised the world. She rallied global stock markets, again, by performing exactly what she is being paid to do. She stated that the FED will proceed cautiously regarding raising future interest rates.  As I have repeatedly said since last year, the FED will not raise short-term interest rates. Now, Dr. Yellen rejoins the rest of her cronies, at the global central banks.  But yesterday’s stock market pop will just be a blip on the chart, and all will be quickly forgotten when stocks are trading 12-30% lower this year.

However, my aim is to maximize every dollar that we invest. Hence, this is why both the long-term and the short-term indicators have to be in sync in order to provide us with the maximum benefit of profits.  This is the juncture where bearishness comes in. When analyzing the short-term time frames, which affect the next 10% move, I am forced to turn bearish.  This is displayed on the gold miners index (see chart below).

Gold Miners Bullish Percent Index

The short-term signals are indicating that it will have a large move downwards, which will shake out the weak positions before starting the next multi-year bull market.

The short-term weekly chart (below) of the ‘bullish percent indicator’ on the gold miners reveals that a correction is occurring. Gold and gold miners are at a reversal level. When there are any readings going above the 70% level, and then declining under the 70 line, it is indicative of a topping pattern, which is an indication of a drop yet to come.

This analysis falls in line with a recent traders gold forecast published this week.

My readers know that we are firm believers in gold and believe that it is the asset class for you to own for the future, expressly during the next financial crisis. This is my bullish view, which is long term, in nature.  For long-term trends, it is always best to view the long-term time frames.

If we look at the monthly GLD chart, we can see that it has already broken out of its downtrend from 2012. This is a bullish signal and a trend change on the monthly chart which will generally continue for a few years.

Significant Low Still Ahead

Commercial traders’ actions can be very useful in the identification of trend-trading opportunities. This is the only position that I track in these reports. The commercial traders control more than 50% of the total open interest. The COT reports provide a breakdown of each Tuesday's open interest for markets in which 20 or more traders hold positions, equal to or above the required reporting levels that are established by the CFTC.  The weekly reports for Futures-and-Options-Combined Commitments of Traders are released every Friday at 3:30 p.m. (ET).  

Commercial traders have not been this bearish on silver since 2008.  At that time, silver traded from $21.00 per ounce, all the way down to the $8.00 area. Currently, the commercial traders are bearish, indicating that lower prices are likely in the near future.

The Commitment Of Traders Report (COT) Forecasting That Metals Are Topped!

The U.S. dollar will most likely trade with a bullish bias.

However, an experienced chartist does not arrive at decisions merely by using only one factor. It is only when the various signals line up that the decision is cemented in concrete.

Whenever the speculation on an asset class overextends, it is time for a pullback. This indicates that speculation has reached levels where tops are generally formed. Such tops lead to a drop of approximately 10 percent.

If the traders buy in now, they will most likely see a 10% loss.  Many may even liquidate during the time that they should be buying instead. Hence, this article is written to warn my readers. If we do not buy now, we will earn 10 percent more, during the next rise.

Only a few experts who have spent enough time reading and analyzing charts will be able to recognize these fine nuances.

My subscribers should either short or stay away and avoid buying now. I will make a posting again when the best time is - when both short-term and long-term indicators are lined up perfectly.

Over the next 24-36 months the financial system, stock markets, commodities, and currencies are going to change dramatically. Trillions will be lost by investors are they sit and watch these events unfold and do nothing to prepare or protect themselves.

There are many things which can be done to avoid much of this nightmare, and also several ways to earn life-changing amounts of money, if one knows what to do. I did this myself back in 2008-2012 and the same thing is happening again.

 

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several financial hubs like MoneyShow.com.