The breakdown of the head and shoulder pattern was interrupted Tuesday when ISM manufacturing struck a 10-year low. Gold reversed immediately and the stock market plunged. Futures are back above $1500, but the technicals and Commitment of Traders (COT) suggest the yellow metal is yet to make an intermediate low.
GOLD COT UPDATE: Typically, we see at least a 50% reduction in commercial shorts from the cycle peak to the 6-month low. Throughout the prior 10-week correction (February to May), shorts dropped from -166,477 to -57,396. Before I expect the next 6-month low, I’d like to see commercial net shorts near -170,000 or lower (currently -303,688).
Expect increased volatility in the coming weeks and kneejerk reactions surrounding escalating impeachment and trade talks. With commercial shorts above 300k and our Gold Cycle Indicator (GCI) at 284, it could be another month or two before metals and miners secure the next 6-month low.
Overall, I’m convinced gold is in a new bull market, and it’s an excellent time to be a precious metals investor.
AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/
This article was originally posted on FX Empire
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