The Gold Direction Indicator Just Turned Green!

For the benefit of subscribers and to help yours truly to make good decisions, we plot an indicator with ten components on a daily basis, that we refer to as the GDI.  On Monday the GDI closed at 39% and on Tuesday it moved into positive territory with a reading at 61%.

 Charts courtesy Stockcharts.com unless indicated.

As the following chart (courtesy goldchartsrus.com) shows, the long-term historical pattern (black line),  is for gold and mining stocks to rise for 8 months, once the June-July lows are put in place.

The black line tracks a 45 year average of gold prices.

Another component of the GDI is a chart that compares gold bullion to the US dollar.

Price carved out an upside reversal on Monday (green arrow), at the bottom of the channel and built on that reversal Tuesday.   The supporting indicators are ready to turn positive.  The 50-DMA is in positive alignment to the 200-DMA (green oval).  Watch for a breakout at the blue arrow that will mark the start of the next wave upwards.

Here is another version of the chart that compares the performance of gold to the US dollar, this time with the gold price at the top.  Whenever this index turns up (green arrow) it is usually matched by a turning up in gold (blue arrow). 

This chart courtesy Frank Holmes at US Global Investors shows Precious Metals have outperformed three other commodity sectors so far this year.

This chart courtesy Zerohedge.com shows a rapid increase in the price of wheat in June, due to drought in the USA,  and in Canadian growing areas.  This has very inflationary implications (think bread and pizza), and it will have a positive influence on gold and silver, as investors take note of price inflation.

This chart courtesy Droughtmonitor.unl.edu shows areas of the US mid-west where the drought is most severe. 

This chart courtesy Goldchartsrus.com shows China’s demand continues to gobble up gold.  During the last week in June over 42 tonnes of gold were moved into the hands of Chinese jewelers and investors.

This chart is also courtesy Goldchartsrus.com and it shows India purchased 220 tonnes of gold during May.  This was the largest monthly amount in at least 10 years. 

This chart is also courtesy Goldchartsrus.com and it compares the demand for gold by 4 Asian nations between January and May (1552 tonnes), to the same period in previous years.  During the month of May, these 4 nations purchased more gold than was produced by all of the world’s mines during that month. 

This latest COT report courtesy Cotpricecharts.com shows the ‘net short’ position at 107,000 contracts.  This is the lowest number since February 9^th 2016.  As a percentage of open interest the number is very bullish at 23%.  Gold is a bargain!  

This chart courtesy Goldchartsrus.com shows silver held in trusts and ETFs is rising sharply.  This is usually matched by a rise in price. 

The COT report for silver, courtesy Cotpricecharts.com), shows the ‘net short’ position of commercial silver dealers at 39,000 contracts.  This is the lowest number since January 19^th 2016.  As a percentage of open interest the number is very bullish at 24%.  Back in early 2016 silver rose from 14.00 to 21.00 – a rise of 50%. 

Featured is a chart that compares silver to gold.  Whenever this chart is in uptrend, both gold and silver advance – but historically silver tends to outperform gold.  In early 2016 this trend rose for 5 months.  Coming off this double bottom, don’t be surprised if a similar 5 month (and possibly longer), rise is next. 

Featured is the Palladium chart.  As a leading indicator for precious metals, Palladium has been setting a torrid pace.   Price found support at 825, and the supporting indicators are positive and ready to rise.

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DISCLAIMER:   Please do your own due diligence.  Peter Degraaf is NOT responsible for your trading decisions. 

Peter Degraaf is an investor with over 50 years of experience.  He publishes a daily report for his many subscribers.  For more information visit www.pdegraaf.com, or email him: [email protected].