Commitments of Gold Futures Traders show large speculators (hedge funds
and money managers) have increased their short positions by 37%. However,
these positions are very small compared to the long positions. Overall net
commitments have not changed very much. They are about at the same level
for six weeks, although still high (attachment 1).
The KITCO Gold Survey reveals Wall Street getting bullish again for this week
with 71%. Main Street (Retail Investors) remain bullish with
The Gold Barometers indicate the same picture as last week: 100% overbought;
this for both indices the ARCA Gold Bugs Index (HUI) (column 2) and the
Philadelphia Gold & Silver Index (XAU) (column 3). These indices cannot be
bought in North America as ETF's but are widely followed to track gold stocks
(attachment 3).
The Gold Miners Bullish Percent Index (attachment 4) continues to be high at
92 on a scale of 0 (zero) to 100. In the middle of March, during the Coronavirus
sell-off, this index was close to 0, representing an outstanding buy opportunity.
The hourly gold spot chart (1 bar per hour) reveals gold traded in a narrow
range from US$ 1'695 per ounce to US$ 1'710 during the first three days of the
week. However, on Thursday and Friday the price accelerated on the upside on
political news. The U.S,. President said on Thursday the pandemic had cast a
pall over his January trade deal with China and suggested he could even cut
ties with Beijing. The second item, which put more fire on the gold price, was
the news that the Democrats dominated House of Representatives passed a
US$ 3 trillion coronavirus relief package by a 208-199 vote. While the package
has no chance to pass in the upper House, the Senate, it gives an indication
that some more huge relief spending will come. Every time a relief package
was passed in the Congress the gold price rallied. (attachment 5).
The daily chart shows spot gold was able to pass the high of the month of
April 2020 (attachment 6). The weekly chart (attachment 7) indicates spot
gold reached a high of US$ 1'919 per ounce in 2011 and before collapsing,
between 2011 and 2012, it traded back three times to a level of US$ 1'795
per ounce, which is now the resistance level.
As per last Friday spot gold closed in New York, 4 p.m. at US$ 1'742 per ounce,
up US$ 39 on the week. The premium of the gold futures (paper gold) price
compared to the gold spot is now back to normal (US$ 3 spread).
The ARCA Gold Bugs Index, called HUI, closed on Friday at 296.92, up 4.0%
on the week (attachment 8). The MACD (lower chart), a moving average
Convergence Divergence is a trend-following momentum indicator that shows
the relationship between two moving averages of a security's price, indicates
the MACD has not confirmed the recent strength of the index. The 20-year chart
of HUI shows this index is just completing a long-term consolidation pattern
going back to 2013 (attachment 9). The index would have to double to reach the
all-time high of 2011, while the spot gold price is only 10% from that high. That
tells investors how gold stocks have underperformed but it doesn't mean gold
stocks have the potential to catch up!
Attachment 10 displays the Point&Figure chart of the VanEck Gold Miner ETF,
symbol GDX. This is the largest ETF investing in gold mining shares. It has
US$ 14.2 Bio. under management. It has clearly broken out at US$ 32 on this
6-year chart on the 3rd attempt.
Attachment 11 displays a graphic of a ratio between GDX (gold stocks) and GLD,
the largest ETF to invest in physical gold. It tells investors if it is better to invest
in gold stocks or in physical gold. For years physical gold was the choice but
the chart indicates the ratio is getting close to a breakout on the upside, around
24 to 25. When that is happening you won't be able to hold back gold stocks. They
would enter into a major roaring bull market!
Net Commitments of Futures Silver Traders show large speculators start to add on
net long positions, while commercial silver traders have added to the short positions.
It looks as finally something is happening in the silver price (attachment 12).
The silver continuous futures daily chart (attachment 13) shows silver had a strong
week gaining just over 8%. It reached the 200-day moving average (red line). The
long term Point&Figure chart (attachment 14) indicates there is strong resistance
in the US$ 18 to US$ 19 per ounce level. If gold is doing well, silver will do as well
or even better.
The Global X Silver Miners ETF, the largest ETF to invest in silver shares, has now
doubled from the severe sell-off due to the Coronavirus crisis in the middle of March.
The index is back where it was in March and has been able to pull ahead into higher
ground (attachment 15).
The Gold/Silver ratio (attachment 16) fell sharply this week to 106.77 from a high in
March 2020 of 123.50. It takes 106 ounces of silver to buy 1 (one) ounce of gold.
____________________________________________________
MasterMetals
@MasterMetals
