The bottoming process for gold is taking considerably longer than we initial anticipated in this post.
While the absolute bottom might not be in quite yet, it is instructive to look at previous periods when gold fell such a long way in a relatively short time.
Consider the following weekly chart of gold metal:
Then consider the weekly chart of GDX the gold miner ETF:
Now consider the level of commercial net shorts:
What can we conclude?
Gold metal is extremely oversold on a weekly time-frame.
Gold stocks (GDX) is at very oversold levels.
Commercial net short position is at very low levels, although not at record low levels yet.
In our view, this set up is an excellent entry point for a longer term swing entry in gold stocks.
We suspect the current environment is similar to the situation in late 2015. Once the metal and stocks whipped around for several months, a strong rally occurred taking the stocks up over 100% in six months.
What could trigger this?
We believe central banks will soon blink when it comes to raising interest rates and quantitative tightening. The American yield curve is on the cusp of inverting, and that foretells a recession within a year of inversion.
While the absolute bottom might not be in quite yet, it is instructive to look at previous periods when gold fell such a long way in a relatively short time.
Consider the following weekly chart of gold metal:
Then consider the weekly chart of GDX the gold miner ETF:
Now consider the level of commercial net shorts:
What can we conclude?
Gold metal is extremely oversold on a weekly time-frame.
Gold stocks (GDX) is at very oversold levels.
Commercial net short position is at very low levels, although not at record low levels yet.
In our view, this set up is an excellent entry point for a longer term swing entry in gold stocks.
We suspect the current environment is similar to the situation in late 2015. Once the metal and stocks whipped around for several months, a strong rally occurred taking the stocks up over 100% in six months.
What could trigger this?
We believe central banks will soon blink when it comes to raising interest rates and quantitative tightening. The American yield curve is on the cusp of inverting, and that foretells a recession within a year of inversion.
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