A bottom in gold but not THE bottom
Gold has struggled to rebound despite an extreme oversold condition and extreme bearish sentiment. Nevertheless, conditions for Gold have not worsened in recent days. In fact, Gold as well as gold stocks appear to be basing for a potential rebound into the holiday season. While some gold bulls expect a major bottom, we aren’t in that camp because the fundamentals are not in place yet to support a sustained advance.
The weekly chart below shows several positives for Gold.
First, last week Gold made a somewhat bullish candle after six weeks of testing $1180-$1190 support and failing to make new lows. With a daily close above $1215, a short-term bottom would be confirmed.
Secondly, note the rate of change indicator as well as the distance from the moving average. Both show Gold as the second most oversold in the past 2.5 years.
Finally, Gold’s net speculative position is -2% of open interest, a 17-year low. Speculators are net short for the first time since 2001. This does not mandate the start of a major bull market, but it does argue for Gold to rally soon.
(By Jordan Roy-Byrne CMT, MFTA)