In this Weekend Report I would like to show you some charts as to why I have made an abrupt short term move out of our short positions in the precious metals complex. I know some of you think I have lost my mind but I can assure you that isn’t the case.
Regardless if I’m bullish or bearish I’m always looking at both sides of the market looking for clues for either direction. This week we got a major clue when the US dollar finally finished its third backtest to the bottom rail of the 11 point diamond top. It’s possible that gold and US dollar can trade in the same direction for awhile but I don’t think that will be the case longer term. So lets look at some charts for the US dollar first as that’s where the biggest clues lie.
A diamond is generally consider a bearish topping pattern but from my experience they can go either way. I’ve shown you some beautiful diamond consolidation patterns that worked out very well. It’s the same with the rising and falling wedges.
Despite trimming $95 billion off their total $4 trillion position in US debt since July, foreign central banks know that “whatever happens, undertaking a massive selloff of US bonds is not an option,” says Li.
In contrast to gold on Monday, silver rose sharply, adding 1.7% to near 2-week highs at $22.29 per ounce.
Platinum meantime rose to 4-week highs, extending its spread above gold prices to a two-month high of $120 per ounce.
Palladium recorded its best AM London Fix since the end of August.
“We maintain our fairly pessimistic outlook for gold,” says a note from US investment bank Morgan Stanley, “as we believe prices have fully factored in a turn in the US interest rate cycle.
“Gold’s tepid response to the recent positive events confirms our view that tapering [of the Fed's quantitative easing] has been postponed, not cancelled, and is expected by year-end.”