Dec 7 Technical Report: Gold Will Take Out 5 Years of Highs in 50 Days*
*If this week closes out above $1237 (spot) – [Edit- It Did]
Authored by Vince Lanci and originally posted on OpportunisticTrader.com
For OppTrader’s Gold Fix Broadcast Monday at 8AM ET (US) , we will look closely at a research report in which the author Michael Oliver makes a qualified but aggressive prediction on Gold prices. Michael iswell thought of by historically respected gold bugs like Jay Taylor. Our intent is to review it on Monday’s broadcast. Secondly, as we have done many times before, our agenda is to help readers of all types of analysis in navigating vagaries of research. You are invited to join us daily in the Gold Fix with Vince Lanci broadcast HERE at 8AM. For now, we offer the main topic of discussion as a “hand out” and market factors on which we focus looking to corroborate or counter points made in the report below
While not prognosticators (anyone who claims – that means us too- to have such powers is either lying or pressured by a camera man), we do try to handicap events and likely behavior given externalities that can be known. Echobay’s founder and managing partner Vince Lanci has been at this for some time now and frequently upsets both bulls and bears with his own opinions. His training is in derivative risk management with 30 years experience in precious metals alone as directional trader, options marketmaker, “player” (former GSCI Mgr. description), university teacher, and promoter of fair markets.
Overall this is a nice technical piece and gets to the point after putting its caveat up front. We do see a lot of macro longs leaning into rallies coinciding with prices Michael cites. That by no means negates his comments. We are also bullish for different reasons and looking for Michael’s second breakout level as a level to sell. But we wouldn’t mind being wrong
Caveat: we are traders who write and as such exhibit all the writing skills of traders. TIA for your reading patience. Really…if you want pretty prose and punctuation we are not your guys.
**The following are visual aides for the Monday Gold Fix broadcast and are intended to be used as reference points during that 8AM Show**
- We see a possible break-up into the higher trading range/channel and see no cause to get hyper bullish. 70/30
- We are long and bullish as described above with both a stop price disclosed and a reversal price undisclosed. 50/50
- Trade War tensions and the folly of the people involved necessitate caution. Resolution should be bullish, as gold is not a risk off asset. But we can see a chance of an aggressive Yuan devaluation as a tool to really stick it to the US stock mkts, and gold with it. violently 50/50
- Hopes of QT ending soon my still be big in stock prices. Any stock drop accompanied by a bond selloff would be very bearish for metals as it will likely accompany a dollar spike for reasons we wont go into here. 70/30
- Gold call skew has been mentioned recently as a bullish sign. We aren’t buying that and call it neutral at best 30/70
Sometimes people buy calls just because they cant afford futures… or worse, producers who sold their hedges in the hole – kind of like stochastics turning at the top- Just Sayin’
Technicals, VBS, Trade Wars aside: QT rules over all and it will not end until either the S&P drops to 2000-ish or one half of the world has killed itself clamoring for the last dollar out there while the other half drops the USD altogether.
- Monthly Macro: Long Gold above $1189 print looking to sell or trail a stop near the 12 month MA
- Weekly: Long as described below
- Daily: indifferent and will continue to play both ways
Read on for reasons behind our opinions
Moor Technical Analysis
Translation: Bullish Above $1211.30 With $1266-1269 on Radar. Bearish below $1211.30
- Moor Analytics
Gold: 12 Month MA – Holy Grail of Macro Traders
Lines up more or less with the analysis above. By no means is it bullish in the way predicted.
Why The 12 Month MA Matters to The MSA Report
Guys like Gundlach, Dalio et al are already long we believe, after being short from $1296-$1290 area as they all watch the 12 month SMA closely when punting in Gold. Gundlach implied as much himself when he said: “In my June webcast, I recommended that gold bugs wait until $1,200 to buy because it had just broken below” a chart point at $1,290, [EDIT- This is where the 12 month SMA came in that month, and not the first time we’ve seen it indirectly referenced- VBL] Gundlach wrote in an email to Barron’s. He turned positive early this month when gold hit $1,196. Based on the technicals, “I am now bullish,” he concluded
This quote is a key “tell” and deserves more attention on how the 12 month MA is used during the broadcast.
Portfolio managers at large equity funds use systems that advise them when being in cash as opposed to long stocks is prudent. What is also known is that funds like these punt gold positions with their discretionary in-house money for fun.
They use similar systems for entry and exit, and never risk much in their positions. Gold is a hobby to these guys. As a result, they like to buy and walk away with long term trade orientations and firm stops. This means using long term moving averages to avoid noise. We know this is true. And here is an example of how that type of positions is implemented:
In an interview a vocal critic of the Gold industry explained why he was buying Gold in Aug 2017 [Edit- Which did not work out, unless he also sold it short using the same discipline]
…Gold is poised to close above its 12-month moving average for the second straight month. Going back to 1970, the average monthly return for gold following a close above the 12-month moving average is 1.47%. The average monthly return following a close below the 12-month moving average is -0.15%.
Trend Line = long above 12 month MA through June 2017
If You Only Were Long on Monthly Closes Above 12 Month MA
Why Having an EOM Stop Ain’t Easy to Do
Examples given in broadcast of how clients differed in their application of this concept: Notional, VaR, Print stops, close stops etc. Including our own hubris in predicting $1700 when we had no business doing so.
VBS Says Be Long above $1236.33 on a Weekly Close
Full disclosure: we front ran our own system and got long GCG at $1245.50 and closed at $1244-ish on fear of our own lack of discipline. We re-entered properly (but at worse prices) and recommended as much to clients on Friday. See accompanying OppTrader Alerts for subscribers:
Undisciplined Trade Puke VBS Proper Re-entry Friday
This VBS Signal is Bullish to $1270, Then $1334.70 so Long as $1205 Doesn’t Print
60 Minute: Gold is Overbought and in the Most Healthy Conditions, a retracement is in order
There is Nothing Bullish Below $1267 at EOM
Good Luck- VBL
Because Gold is Boring to Write About: Led Zep’s Stairway to Heaven: Roots and Branches