Gold Market Update
originally published January 8th, 2012
We have in recent weeks been rather confused by the contradiction between the strongly bearish price patterns that are developing in gold and silver, which are indicative of a major top that portends a brutal deflationary downwave, and the seemingly bullish COTs and sentiment for the sector. Now we believe that we have come to a realization with regards to what is going on with the COTs, which will be set out lower down the page - first we will look at the price pattern development.
Diehard bulls are now raving about the "great buying opportunity" that they see existing in gold right now, after its recent losses. This is reasonable and understandable as gold is now about $300 below its highs of last August - September, is oversold and in the vicinity of a still rising 200-day moving average, and COTs and sentiment are looking bullish. However, despite all this the price pattern that is forming in gold, and in silver, looks bearish in the extreme. As we can see on the 2-year chart for gold, a large bearish Descending Triangle has developed since it put in its highs, above a clear line of support at $1520 - $1530. Unless gold can abort the pattern by succeeding in breaking out above its descending upper boundary shown as the red trendline on the chart, then it is destined to break down, which will effectively mark the end of the bearmarket and this implies the onset, or rather the rather the rapid deepening, of the deflationary downwave that will then engulf many countries that have so far escaped its worst effects such as debt-wracked Britain and the US. If you want to know how bad it will get, you have simply to study what has already occurred in Greece and Spain - and it could get a lot worse than that with food shortages, riots, and cities going up in flames.
Charts & Read more: http://clivemaund.com/gmu.php?art_id=68&date=2012-01-08