- nihal123Top contributor
- Posts : 6327
Join date : 2014-02-24
Age : 56
Location : Waga
Precious metals rallied sharply on the Brexit vote, but there are negative factors developing to consider. Commercial hedgers (smart money) have increased their short positions to record levels in commodities such as gold, sugar, and agriculture. To me, this suggests the potential for a quick wave of deflation.
Both junior and senior gold miners were up significantly on Friday, but neither closed above their key reversal days established on June 16th. Understandably, a difficult task while US stocks were down over 3% on average.
There was substantial Selling on Strength (SOS) numbers in GDX for Friday (see charts below). These figures pop-up around significant tops in gold and miners. It is likely this is related to the global selloff. However, until miners close above the outlined levels, I remain somewhat skeptical.
Gold and the US Dollar were up significantly on Friday. Though they occasionally rise in tandem, I'm more inclined to believe that one of them is being disingenuous. I'm interested to see if they decouple next week -- and one stops rising. The dollar is traditionally viewed as a safe haven.
Whenever a price shock like this occurs on a Friday, there is always the potential for continued selling come Monday morning from panicked investors worried sick over the weekend. Moreover, margin calls will exacerbate selling. After the contagion ends, a temporary rally will ensue that will likely last a few days. Once complete, we’ll assess the structure to plot a forecast.
US Dollar Weekly Chart
The dollar ended the week positive with a close just above the 50-week EMA. It will take breaking above the dashed trend line to make another run at the 100 level again.