Last month gold has finally decided to back off in its price surge to $1325. If this so-called bull market in gold is real then a strong correction has to complete well before the $1160 price bottom. That’s a lot of price distance gold has to cover, which the majority of participants don’t expect. Banks are up to their usual tricks and have been buying gold in 2018. The problem with banks buying and selling gold is they always buy high and then sell low at bear market bottoms. Back in 1998-2000, they were selling gold as fast as they could with countries unloading their gold stashes as well. In 1999 gold was considered an ancient relic, close to junk status.
As fast and far that gold can soar, it can crash even faster and deeper. We could see a correction, but don’t get excited as even a zigzag decline can crash to new lows if this bullish phase is just a big bear rally. Fear could engulf many asset classes where there is no place to hide as stock markets and gold crash at the same time. Sure, I can be wrong and it will be important to recognize a correction when it’s going to finish.
I believe the 2011 peak was a 30-year mania peak in Cycle degree wave 3. Any Cycle degree bear market in gold does not end in just 8 or 10 years, as the bear market in gold during the 1990’s last 20 years.
Since the government shutdown, the first COT report was published last Friday. The way things are going the government could shut down again, with no COT reports being produced.
When I first saw the report I noticed a very large shift to the bearish side, with about 5-6 weeks backlogged data being published.
Commercials added 33,486 short positions and took away 2058 long positions, for a combined total of 35,544 contracts totaling just over 3.5 million Troy ounces. Now, look over to the NON-Commercial side (Speculators). We can see they did the exact opposite, chasing this gold bullish phase. The problem is that both parties can’t be right! The mass media always talk about what the speculators are doing and ignore all commercial hedgers action. From my perspective, the commercial hedgers have the best track record and ignoring them usually brings pain and suffering onto the bulls that think a trend can never end. What the COT report is telling me is that no super gold bull will start to soar anytime soon.
There is no corrective price bottom I want to use right now, as a 60%-70% net crash can happen. The $1200 price level is a gold psychological price level so if and when the gold price ever hits that area again it could put up a big fight!
Silver has a lot less distance to fall before it resumes the big bear market again. Silver only has to fall below $14 and then below $13.50 and it would be back into its bear market.