Gold battles back, as bugs cheer

NEW YORK (MarketWatch) — Gold was looking pretty dismal most of last week and so were gold shares.

Gold for December delivery GC1Z +0.37%  traded on the Comex division of the New York Mercantile Exchange, from last Friday’s close to this Friday’s low, lost $93.90 or 5.1%. The NYSE Arca Gold Bugs Index XX:HUI -0.68%  at its low was down 7.1%. 

This unpleasant trend caused the Gold Charts R Us service (GCRU) — which attempts to trade short term moves in gold and gold shares — to take decisive action in its weekly update published at midnight on Wednesday: 

“Sell half of your gold position at mkt. Keep the rest while it bounces between the $1,900 and $1,800 levels. Be ready to sell if it gold closes below $1,800 on a 2[-day close]. On the upside, look to buy gold again after a 2[-day close] above $1,900, or after a dip that holds above the $1,650 level on a 2[-day close].” 

GCRU was originally affiliated with now-retired market veteran Harry Schultz. It has been taken over by the Aden Forecast operation. The Aden sisters stress that it uses a shorter-term trading style than their flagship, which in fact did not recommend any changes when published the following day. See Sept.15 column.

As it happens, Friday brought relief. Dec gold closed up $33.30 on the day and so down only 2.46% down on the week. Gold shares as tracked by the HUI closed up 1.67% on the day and so were down only 3.3% on the week. 

What is going on? Australia’s The Privateer provides cogent if cynical insight: 

“Gold slumped on Monday [Sept. 12] after the G-7 assured us all that they were going to ‘do something’ about global economic growth. It slumped even more on Thursday [Sept. 15] when no less than FIVE central banks (of the U.S., the E.U., the U.K., Japan and Switzerland) announced coordinated efforts to stuff U.S. dollars into the European banking system. Gold then recovered on Sept. 16 …” 

“Gold (in U.S. dollar terms) has now been at or pretty near the top of its upchannel for an entire month now. Each challenge to break ABOVE the channel has been met with an even bigger announcement from the global financial ‘powers that be’ that they have the situation ‘under control’. Thus far, they have not yet been able to produce a sell-off similar to the one which took place in the great deleveraging U.S. dollar rally of late 2008. They are not going to stop trying.” 

Over at LeMetropoleCafe, they have their own angle, using the differences between the local gold price in key importing markets and the world to evaluate buying pressure. 

During the slide, the gloomy news was that weakness in the rupee was inhibiting demand from the crucial Indian market — although other important buyers like China, Vietnam and Turkey appeared active. 

But on Thursday and Friday, the rupee firmed up, India turned a buyer, and LeMetropoleCafe started talking about a bear trap. 

The recovery in gold shares greatly cheered “Trader Dan” Norcini. He commented on Friday: 

“The mining shares were hit rather hard this week with a bout of selling after the HUI made a new all time high but the price action still looks very good considering where it saw the buyers stepping up…Thursday saw a sharp spike lower across the entire sector; however, buyers showed up in large numbers, so much so that they took the price all the way back to the opening level. That is bullish price action.” 

Approaching matters from the negative side and using Market Vectors ETF Trust Market Vectors Gold Miners GDX +0.11%  as his measure, chartist Martin Pring suggested in his Weekly InfoMovie Report that until GDX could rally above the “break-out point around $64, I think a cautious stance is in order.” 

But GDX closed on Friday at $64.11.

Is the bear raid over? 

 

Source; http://www.marketwatch.com