There finally comes a time when you get a feeling that things are going to change. It just feels different. I’m not about to proclaim that the correction is over yet, but I think we are getting close.
MSM are still as bearish as ever. They love to hate gold and silver. They pile on, one after another, working feverishly to dull all interest in gold. They have the price on their side so it gives them even more “credibility.” As Bill Murphy loves to say, “They roar over over our whisper.” But lately some of the Wall Street bears are softening up a bit.
Dennis Gartman said on CNBC below:
“You have to like it,”
“Gold wants to go higher, probably predicated on a continued expectation that the Fed will continue to expand reserves, and so shall too other central banks.”
–CNBC, July 22,2013
In an interview on “Squawk Box,” Gartman said:
“Having been bearish of gold for a long period of time, given the level of skepticism that has incurred, given the changes in the open interest in the futures markets, and perhaps I’m wrong—golly, it wouldn’t be the first time that I have been wrong and it certainly won’t be the last—but having been bearish of gold for a long period of time, I thought perhaps it was wise to step up and be a buyer.”
–CNBC, July 5, 2013
Larry Edelson, who has been bearish for nearly a year, and his charts have been quite accurate along the way, recently said, “The bull market in gold will resume on September 26th.” He would not be surprised to see one more dip before the take off, but if we are not now at the bottom, we are very close, both in price and in time. Let me repeat that – close in both PRICE and TIME. Coming from Edelson, that is a change in thinking that I take note of.
When it comes to gold, Richard Russell is a true believer. He has softened his position on gold this year but is just starting to come around again. Here is what Russell said below:
Misshapen? I am not a chartist, but doesn’t it kind of look like a cup and handle? If it is, the BREAKOUT has a good chance to be UP
In the meantime, gold has formed a sort of misshapen head-and-shoulders bottom pattern, as you can see in the chart I have posted below.
–Dow Theory Letters, August 2, 2013
To me, it looks like a “Cup and Handle” and that is usually strong formation for a breakout to the upside. I’m not a chartist, but still, that’s what it looks like to me.
Trader David R told me this is now the time “to buy the dips.” He is very qualified and very accurate. This is the bullish he has been in a while.
The Chartman, who also has a strong track record, especially in the short-term, says:
Friday will be day 8 of this correction and mark the 6th week since the bottom. Typically, the correction/consolidation in this situation can last 3-4 weeks. Also, the next leg higher tends to begin by the end of week 8. So we will likely see another week of consolidation before the sector has a chance to embark on the next leg higher. While weakness on Friday/Monday could be a buying opportunity, the consolidation/correction has more time to go.
Magic Pivot # 1325.
Resistance # 1331, 1341, 1351, 1377-73.
Support # 1325, 1318, 1313, 1309, 1300.
One of my all time favorites, Trader Dan Norcini is getting excited about gold. On a KWN interview, Norcini said:
Going back to 2006, when this data was first released on a disaggregated basis, this is the smallest net-short position that these guys (commercials) have ever had.
I cannot recall a time when they had this small of a net-short position. So there has been a huge change going on within the internal composition of the futures market there in New York when it comes to these commercials. They are moving more and more away from the short side of the market, and more toward the long side.
And it looks like the (small) speculators are continuing to lean (on the short side) against this thing (gold). That’s what brings us back to the price action, Eric. You can tell there has been heavy resistance in gold at around $1,340 to $1360. But we can tell who is selling it (paper gold): It’s not been the bullion banks. It’s been the hedge funds and other speculative groups.
The speculators are now in a ‘sell-the-rally’ mode in gold, while the bullion banks are in a ‘buy-the-dip’ mentality. That is what has changed in this market. I want to continue to monitor this, but based on this trend there is a (strong) possibility that if gold continues to stay weak, that you are going to see even more short covering on the part of these commercials — to the point where they may be net-long for the first time that I have on record. That itself is quite a dramatic development.”
Watching what is going on there lately with the gold market, we’ve seen a very steady drawdown in the net-short position of the big commercials (the bullion banks). This week was rather fascinating because we are to a situation now where we are only about 5,000 contracts away from the commercial category being net-long this gold market.
– Dan Norcini, (KWN interview)
The Aden Sisters are now turning cautiously optimistic. They wrote:
It looks like the lows are near because gold and gold shares are truly at extreme oversold areas. Vulnerability is still with us, however. Use weakness to buy during this month and next. Silver is nearing its major uptrend while palladium has held up the best. Keep your lower core position in the metals and shares listed below.
Buying physical gold is a safer way to keep your gold and silver, but keeping some paper gold and silver for the sake of convenience is fine too.
Ted Butler points out the very unusual situation where the bullion banks and especially JPMorgan are now very long gold and silver. The small hedge funds and speculators are taking the other side of the trade and are massively short. Guess which side ALWAYS wins? You know, JPMorgan. For those of you who are not familiar with the terms “short” and “long,” simply put, to be short you make money when the price falls and to be long you make money when the price rises. These are hedges and bets on which way the market will move, up or down. Now it may not be tomorrow or even next week, but sometime soon, the market should start to move rapidly UP. Once that happens, the “shorts” start to sell, locking in the profits they earned when gold and silver were headed down, and they sell even faster when they start losing money on what were very profitable trades. There is not reason the price of gold and silver shouldn’t move back up as fast as they were pulled down. The same forces that caused the drop also cause the rise. All along the way, down and up, algorithms instruct their computers to sell or buy. We are getting very close to the reversal here, the time when the computers are spitting out massive sell order (the specs). Then, JPMorgan and friends will reap billions of dollars in profits; just as they did for the last year when the market was plunging and they started out on the short side. It is really amazing, almost unheard of, to see JPMorgan long. Record long, at that.
Here’s what I would do.
We are entering the strongest time of the year for gold demand. The demand comes from India and China. It comes from the jewelry industry. Gold is used in festivals and at weddings. There are already shortages, and this should intensify. Year to year charts are not a promise of things to come, but last year at this time, gold was moving UP rapidly. It’s usually a seasonal thing. This year it could be similar.
Eric Sprott, speaking to KWN said:
The depth of this bear-market has set the stage for an epic rebound Eric explained, in that, “This event that we’ve gone through…which I think is now officially over on June 28th, is setting us up for a gargantuan rise in precious metals equities. It’s my own view that gold will go to a new high within the next twelve months and…I think when it goes to new highs, we’ll see a lot of people come into the space…such that I can imagine a very, very significant increase in precious metal equity prices. I have in my mind 300% to 500%.”
–Bull Market Thinking, August 2, 2013
Ted Butler says:
This week, the silver/gold price ratio tightened in slightly to just over 66 to 1, but this level is close to the most undervalued silver has been relative to gold in three years. Make no mistake, I think gold is on the verge of a significant move up, but I would switch from gold to silver in a heartbeat based upon all the facts, as I know them. That’s because, in the end, silver should exceed whatever gains gold achieves by a wide margin.
Ted is not only bullish on gold; he is over-the-top bullish on silver. It wasn’t that long ago when the silver/gold ratio was in the 40s. In this situation, buying silver makes far more sense than buying gold. Not only the out of the ordinary ratio, but now, because India is imposing restrictions on the import of gold into their country, the Indians are significantly increasing their purchases of silver. China is also increasing their appetite for silver. If gold is ready to rise, silver is ready to explode back up. Mark me down, personally, as a strong buyer of silver.
I acknowledge that picking bottoms is not my strength, but I do know that at these prices, with the bottom either already in, very close, this is the time to finally get back to accumulation. No one will be disappointed if they buy gold and especially silver at these prices. They will probably be looked at as a great buy, and at prices that will never again be available.
So here is what I would do. Both the Chartman and Larry Edelson believe that prices will start to rise dramatically before the end of September. There are others, like Dan Norcini who says the bottom is already in. Richard Russell’s chart (above) looks a lot like a Cup and Handle formation that is getting ready to blast off. There are quite a few Black Swans lurking just out of view. There is reason to start to move conservatively back into the precious metals now.
When pushed to the wall, my dates for the full-scale resumption of the bull market are either 9-28-13 or 2-1-14, at the latest. Logic tells me that Ben Bernanke will do anything and everything in his power to keep the markets stable heading into his retirement. He certainly prefers a strong stock market, a growing housing market, a strong economy, a strong dollar and a stable bond market. That takes a lot of intervention and holding down the price of gold is a part of the process. But after, he leaves office, it will all change. And yes, I do expect he will stick around until the end of his term.
To sum it up, now is the time to start to move back in because we are at or very near the end of the yearlong downtrend. Get ready to increase your purchases before the end of September. The longest you will have to wait is until next February. Next winter and spring should be a relief for the gold bugs and a kick in the butt for the MSM perma-bears.