GoldMinerPulse: Market Sentiment Track Record

• Home
• MBETA
• trends
• prices

GoldMinerPulse Market Sentiment (MS) Metric Track Record

19 April 2013 View After Market Close: MS Makes New Multi-Year Low While Physical Delivery Strenghtens

• The week ending 19 April 2013 is one for the paper and physical gold trading record books. With the crash in gold prices, the MS made a new multi-year low. Physical demand for gold, on the other hand, spiked around the world (see 18 April to 22 April Summary of Gold News, Views and Opinions).

  In Shanghai, the open interest for Au(T+D) stood at 222.8 tons at the close on 12 April with gold at $1564. By the close on 16 April the open interest had dropped to 181.1 tons when gold closed at $1382. By 19 April, the open interest was back at 219.3 tons when gold closed at $1425. Physical gold delivery in Shanghai was strong and April is on track to become one of the top 3 months for physical gold delivery on the SGE, even with the lose of 3 trading days to holidays (see SGE daily updates).

  

• Consider the patterns in the MS up moves and drops over the last year:

  

  • The 1st MS drop was the longest and was followed by the longest failed MS recovery period.

  • The 2nd MS drop and failed MS recovery period was sharper and briefer.

  • The 3rd MS drop was brief and sharp which suggests a likely sharp recovery if the symmetries seen on the 1st and 2nd drop/recovery cycles are preserved.

  • Given that classical chart reading involves wave patterns of 3 waves (2 up/down and 1 down/up) and 5 wave patterns (3 up/down and 2 down/up), and with the probable completion of a 5 wave down move from 5 October 2012 (3 down and 2 up), suggests that a 3 wave or possibly 5 wave up pattern going into the summer of 2013.

• The Kitco Gold Survey of market participants completed 19 April 2013 has:

  • 64% bullish,

  • 22% neutral and

  • 14% bearish.

  Taking the Kitco survey results as a contrary indicator suggests next week is more likely to be neutral to falling.

Outlook for Week Ending 26 April 2013

Shanghai will be closed on 29 April 2013 for a public holiday. A further attack on gold towards the end of the week must be considered a possibility. Physical delivery on the SGE, and around the world, will again be the key metric to watch to confirm any trend developments.

I interpret the SGE open interest movements over the past week as positive for a strenghtening gold market based on the application of Wikipedia Open interest to SGE open interest positions:

• During the week ending 12 April, we had price of gold falling and open interest rising which indicates a weakening market.

• With the crash of gold on 16 April, the open interest also fell with the price of gold, a sign of a strenghening market.

• By 19 April, the price of gold had risen from the lows and the open interest was also rising, a sign of a strong market.

While the 29 April 2013 holiday in Shanghai is another excellent opportunity for a paper gold attack, I also believe the strong world wide demand for physical gold delivery can not be ignored. Another paper gold attack could prove extremely costly in terms of gold flows out of the west.

While it is an open question as to how many tons of gold the US still holds (excluding gold that was leased out to the bullion banks), another paper gold attack could proven even costlier and to what end? Was the expectation that the paper gold crash would lead to a mass liquidation of physical gold holdings around the world allowing the bullion banks and US Fed to buy back bullion in exchange for fiat currency?

Finally, the talking heads are telling a gold bubble story while the world private wealth is showing us a different interpretation -- drops in the price of paper gold is an excellent reason to add to one's physical gold holdings and not a reason for selling. The strenghtening gold market thesis is supported by the trends in the SGE open interest.

The MS is setup for a sharp V shaped recovery from the 16 April 2013 lows, leading to 3 wave or 5 wave up move in MS over the coming months. However, on the other hand, further paper gold attacks can not be ruled out, especially with the 29 April holiday in Shanghai, so I am expecting POG and MS to end next week largely unchanges and setting up for a sharper move up in May/June. I expect that selling in May and going away will very likely be a poor play in 2013.

GoldMinerPulse Calls From Past Friday Market Closings

• 2013-04-12 -- MS Continues Making Multi-Year Lows

• 2013-04-05 -- MS Multi-Year Low Holds

• 2013-03-29 -- MS Up Turn From Multi-year Lows Continues to Build

• 2013-03-22 -- MS Up Slightly From Multi-year Lows

• 2013-03-15 -- MS Continues to Make Multi-year Lows

• 2013-03-08 -- MS At Multi-Year Low

• 2013-03-01 -- MS Hitting Lows Not Seen Since July 2012

• 2013-02-22 -- Up trend from 20 December 2012 Failed

• 2013-02-15 -- Up trend from 20 December 2012 Confirmed

• 2013-02-08 -- Up trend from 20 December 2012 Still Holds

• 2013-02-01 -- Up trend from 20 December 2012 Still Holds, But Is Weakening

• 2013-01-25 -- Up trend from 20 December 2012 Still Holds