Saturday, 22 March 2014

Who Drives the Price of Gold / ADX indicator for Gold / Golden Crosses / Charles Nenner

Anyone following the gold and mining market is likely to find (perma) bullish opinion at sites like King World News. While they do carry a few interesting interviews it is well to also follow some of the traders who take a more critical view of some of the more dramatic claims of the "gold gurus" and have been more wary of the 2014 advance, without simply being gold perma-bears or sceptics  ........
Kid Dynamite  is one such and recently looked at the relationship between the Gold Price and Hedge Fund Trades. While physical gold buying may indeed be going East it is often value driven and market price surges still seem to depend on leveraged Western buying.
There are long standing accusations of manipulation in the gold market, in particular the leveraged Comex contracts, of which KD and Norcini are very dismissive. A recent interview with GATA puts some of the counter-case.

Kid Dynamite's analysis followed on from discussion of the continued importance of Speculator buying by "Trader Dan" Norcini.
Gold Price and Hedge Fund Activity Part 1   /   Part 2

Norcini's "Monthly Gold View" of 16th March also makes very interesting reading to understand why some are unconvinced by the 2014 moves to date. Norcini looks in particular at the ADX Average Directional Indicator to suggest that there is more work for gold to do to prove a new bull.

Here Gary North discusses the improbability of Jim Sinclair's $50,000 Gold "senior moment".

Charles Nenner Research focus on cycle forecasts for markets and called the gold top in 2011. They see the recent move as a bounce to around $1400 with the next true bull advance in Gold starting in July and moving over $2000. Interview   Gold discussion 26m in /    Transcript
Suggest strong gold moves in deflationary periods when there is nowhere else to put money.

Larry Edelson again called the 2011 top though missed the last up moves which brought criticism. He has remained sceptical of this move seeing a new bottom in May.

It seems probable that gold and the miners saw capital inflows while the main markets paused earlier this year but will face headwinds while the bull returns and the main markets reach "New All Time Highs", as Josh Brown describes these arouse powerful emotions. (HT My Own Market Narrative).
However there may be changes afoot, Biotech has been a leader but took a tumble.

Mining investors remain jumpy after a 3 year bear.
The Canadian venture and the small "hot" stocks were the first to fail in the new tax year of 2011, well ahead of gold. Can the juniors start their bull ahead of a gold and major miners advance in May/July? Buying sizeable positions in these stocks is not so easy for the large players like Sprott and others, no doubt they will welcome weakness and a shake should see 2014 buyers take profits.

Bullmarketrun regularly reviews the technical state of the Canadian Venture and remain convinced on a new bull on a selective basis.
I would add that a review of stock charts across the Nevada juniors (charts part way down the Nevada page, I assume all readers can view these?) shows that many have made golden crosses some time ago and this week's corrections have just brought them back to the 50 day averages.

We now see golden crosses in the major ETFs at exactly this point of weakness, will they be immediately invalidated? The Canadian Venture saw the golden cross and an immediate pull-back ealier this year but has since moved ahead.
Here Adam Hamilton of Zeal discusses the Golden Cross
The bottom line is gold stocks are triggering a major Golden Cross buy signal. And this is happening after a long selloff hammered gold-stock prices to extreme lows fundamentally, spawning hyper-bearish sentiment. Thus there is a very high probability that this Golden Cross flags the successful reversal of last year’s brutal downtrend into a new cyclical bull market. The recent gains are just the very beginning.
As the CDNX made its golden cross the, short term,  ADX directional indicator also made a positive cross. This has not happened with the main miner ETFs, in fact the reverse.
We need to be wary of whether the CDNX is reflecting miners or Oil & Gas, especially in Canada benefiting from a weak Canadian Dollar.
The GLDX ETF of smaller juniors / explorer-developers is also showing greater strength and an earlier golden cross but has also seen the negative ADX cross.
Obviously simple maths tells us that until prices fall below those of 50 days prior the 50 day average can continue to advance and avoid invalidation of the golden cross.

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