Negative Sentiment Fuels Gold Bull"

As gold soared towards $1434 recently, greed seemed to be making a comeback.  From the lows near $1180, the golden metal had rallied about $254, with only one minor pullback.

The sell-off over the past few weeks has squashed that greed, and that’s good news for gold bulls.  Markets rise on walls of worry, and worry seems to be creeping back into the gold market.

That’s the daily gold chart.  From a technical standpoint, I don’t see anything to be overly concerned about.

My stokeillator reached a level of about 90, as gold peaked in the $1434 area, and the lead line is now at about 47.

The stokeillator (14,7,7 Stochastics series) tends to fall to the 20 area, very roughly speaking, about once a month. 

Using that rule of thumb, gold could drift lower or consolidate here for another couple of weeks, before starting another move to the upside.

Interestingly, the next FOMC meeting announcement is scheduled for September 18^th at 2pm.  Bloomberg surveys suggest that’s when most money managers believe the Fed will announce the start of QE tapering.

At 2:30pm on the same day, Fed Chairman Ben Bernanke is scheduled to hold one of his rare press conferences.  Journalists will be able to ask him some questions, and he will respond.

If Chairman Bernanke stuns the mainstream money managers by holding off on the “taper caper”, gold could surge violently higher, and perhaps trigger a stokeillator buy signal, from near the 20 level on my gold chart.  

Any tapering that does occur is likely to be quite mild, and it’s probably already priced into the gold market now.

I think the growing “demoralization” amongst gold bulls, on the current pullback, is no different from the mood that set in on the first pullback, and it’s probably very healthy for the market. 

Note “pullback #1” on this gold chart.  Gold market investors should take a quick trip down memory lane, and remember how they felt at the lows of that first pullback, in the $1270 area.

Note the technical similarity of “pullback #2” to “pullback #1”.  That’s bullish. 

The upcoming FOMC meeting, press conference, and the taper caper issue are creating modest tension in the gold community, but the gold chart looks very healthy.

It’s always comforting to have technical “top guns” looking for higher prices.  On that note, Scotiabank is a very powerful bullion bank.  What do their top technicians have to say about the gold chart? “We see the latest price action as a correction of the uptrend which began on June 28th.  Support is at 1352, which is the low from August 20th. Below there, at 1337, is the 38.2% retracement of the June to August uptrend.” – Scotiabank Gold & Silver Marketwatch, September 9, 2013.

There’s more good news for gold bulls.  CNBC reports this morning that Wang Jianlin, reputedly the richest man in China, says his nation’s property market is “immune” to Fed tapering.

Investors should focus on China’s industrialization and urbanization.  These factors are much more important than short term booms or recessions.  Millions of new gold investors could be “created” in China, during the next wave of industrialization.

Deutsche bank apparently agrees. “The ‘new form’ of urbanization will include developing big city-clusters, rather than just a few big cities, with more urban retail properties in Tier [sic] two, three and four cities, it said in a recent report.” – CNBC News, September 10, 2013.

The term “city-clusters” should send shivers of bullish excitement down every gold investor’s spine! 

I’m particularly excited about the position of my stokeillator on the GDX (gold stocks ETF) chart.  The stokeillator has arrived in the 20 area, and powerful rallies can begin there.  Note the converging green trend lines. 

Gold stocks could find powerful support at the apex of those lines, in the $26 area.  I’m covering short positions that I put on in the $29-$31 area, in anticipation of a new gold stock rally.  

Some investors have noted a head and shoulders top pattern in play on the platinum chart, and they believe that’s bearish for gold.  Perhaps, but I’m not so sure about that.  That’s the daily platinum chart, and there is a head and shoulders top in play, but it’s very small.

Note the position of my stokeillator.  The lead line is near 27, suggesting the decline is almost done.

Also, I think the small top pattern could be helpful in creating a much more powerful bullish formation.  That’s the same platinum chart, with a potentially powerful inverse head and shoulders bottom in play, and that pattern is truly enormous.  The minimum technical target is $1800.  Platinum can be a leading indicator for gold at times, and if this huge bullish pattern plays out according to script, gold bulls could soon be sporting a very big smile!

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Special Offer For Gold-Eagle readers:  Send me an Email to [email protected] and I’ll send you my free “Bar By Bullish Bar!” report.  I’ll walk you through every day of GDXJ trading since it bottomed, and hopefully convince you that the bulls are in total control of the junior gold stock price grid now!  Thanks.

Stewart Thomson 

Graceland Updates

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