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Is The Gold Rally Sustainable?

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Is The Gold Rally Sustainable?


Gold-Investment_1.jpg


by ANGTraders
02/05/2016 3:16 PM

Gold has stubbornly and vigorously traded UP as the Dollar headed down. It had been trading down with the Dollar, which was unusual, until this past week when it sprinted higher in response to the lower Dollar. If the Dollar does not bounce off of its lower-range boundary of 92.50, then gold could continue higher and we would have to realize our losses. It is very close to the line, but there is still a possibility that it won’t cross.

Apr.%2028%20USD%20trading%20range.png


The pink circles on the chart below show how Gold has rallied in response to the higher bond prices and lower bond yields. This is the type of trading one would expect if rates were actually falling or expected to fall. Rates are not likely to fall, so gold should move lower. So far, it has refused to behave within our probability curve.

Apr.%2028%20gold%20and%2030y%20bond.png


The gold futures speculative traders continue to squeeze into an already crowded space, and the commercial traders are maintaining their historically large short interest. This situation has to give-way at some point. Unfortunately, we have no way of calculating how long this unsustainable situation will hold.

Apr.%2028%20gold%20price.png


Apr.%2028%20commitment%20of%20traders.png


The chart bellow shows that the RSI for the HUI has ventured into over-bought territory five times since 2008 (not including the present situation) and on all five occasions, the price of GLD corrected. We are once again in over-bought territory so the probability is in favor of a drop this time as well. Again these are historically derived probabilities, not fortune -telling.

Apr.%2028%20HUI.png


For now, we are watching the 92.50 level in the Dollar and we will adjust our gold positions if it closes below this level.

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http://www.marketslant.com/articles/gold-rally-sustainable