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A Glimmer Of Hope For The Long Suffering Gold Bears
Gary Savage: As most of you who have followed me over the years already know, I’m not really expecting a final three year cycle low in the CRB until later in the year. However… there are a few signs popping up that could be indicating that 3 year cycle low is going to come earlier than expected. And by earlier I mean it may have already occurred.
First I want to talk a little bit about oil. I think everyone knows by now that the fundamentals for oil are completely broken, there is simply too much supply, and price will never be able to rise by any significant amount anytime in the near future. I’m starting to see outrageous predictions of $20 oil. However, that is exactly the kind of sentiment I would expect to see at a three year cycle low.
Moving on to some long term charts, you can see that the CRB has reached the kind of oversold levels indicative of a major three year cycle low. By some measures the CRB is more oversold than either of the last two major cyclical bottoms in 2009 & 2012.
Clearly the main driver forcing commodities lower is that the dollar has been in a seven year bull market. However, seven years is just about a normal duration for a dollar bull, and as you can see in the chart below the dollar has retraced 50% of the previous decline, which is coincidentally the same retracement that the previous bull accomplished prior to a bear market. Note the extreme overbought conditions on the monthly chart. With interest rates at virtually 0, and little incentive to raise them in the near future one has to wonder how much upside is left in this bull.
The last thing that anyone is expecting right now would be for the dollars three year cycle to top in a left translated fashion on month 10. I think everyone is expecting the dollar and euro to go to par sometime this year (as am I). I just wonder if it might do the exact opposite and catch everyone on the wrong side of the boat.
And yes I know, my expectation has been for a counter trend move early in the year followed by one more drop into a three year cycle low in the summer or early fall. And that does still remain the most likely scenario.
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Source: http://marketdailynews.com/2015/03/02/a-glimmer-of-hope-for-the-long-suffering-gold-bears/
