Commodities
Best Financial Markets Analysis ArticleGold's bulls and bears have fought each other to a standstill so that an eerie calm now exists in the gold market, rather like the period in Europe known as the Phony War which was an early stage of the 2nd World War, where despite having declared war on each other, the major powers did not engage in significant military operations. Just as this phase was the "calm before the storm" it is clear from an examination of the gold chart that this time of tranquillity is about to end - that much we can be fairly sure about.
When you weigh up the conflicting indications, it is small wonder that neither bulls nor bears have thus far been able to get the upper hand. Looking at the 3-year chart we can see that we have to take into account the following factors. Gold has since early last year marked out a potential cone-shaped Cup-and-Handle consolidation which is bullish, simulataneously a Head-and-Shoulders continuation pattern, which is bullish, but also a pattern that might turn out to be a Double Top, which is obviously bearish. Moving averages are all in bullish alignment and would support a breakout to new highs, and seasonal factors are strongly in gold's favor as we approach September, but the COT structure for gold is that which typically precedes a downturn.
The number of advisors calling for a gold breakout to new highs is at a very high level, which is normally a contrary indicator, but this is complicated by the fact that it includes many of the best analysts in the business. In addition gold and silver lease rates have dropped close to zero, indicating that storage space is scarce, meaning that they are piling up somewhere. This is what is happening with various base metals whose quantities in storage have risen to "nosebleed" levels - this is bearish because it reveals that instead of being bought to meet industrial demand, these metals are being hoarded by speculators. The exception is copper which it is suspected is being squirreled away by the Chinese "somewhere the sun don't shine". It would appear that "Son of Bubble" is coming of age - do people learn from the past? - no, of course not. Crude oil stocks are also at historic highs, which is not good news for oil prices, and a background negative factor for gold. The standoff in gold is also a reflection of the still unresolved inflation/deflation dilemma.
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