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Mib 091116 Update
Mib 091116 Update
1200 50
Over the last two years, it
Gold v.s. Gold/Crude Ratio took five attempts for gold
45 price to finally break above
1000 the psychological resistance
40 at U$1000. Though gold
Gold has been in a secular bull
800 (Left Scale) 35 market in all currencies,
much of the “credit” for the
30 decisive breakout to the all-
600 time high above U$ 1000
25 goes to the sliding U$.
The three groups with largest OI are Commercials which now excludes Swap Dealers, Swap Dealers as a new separate
class and Money Managers. The featured chart plots the Net OI held by the latter two groups. Having different trading
objectives and functions, their net positions have dominant bias, with money managers being net long and swap dealers
being primarily net short.
However, their net positions fluctuate with changes in gold price, and periodically can reach extreme levels. Presently,
Money Managers hold the largest net long position since gold first penetrated the $1000 mark in March’08, only to drop
by 30% in the subsequent 7 months. Swap Dealers that were heavily net short in March’08 have now even larger net
short OI. In contrast, at the October’08 lows Money Managers were only marginally net long while Swap Dealers were
“even”. My interpretation of Net OI of these two groups leads me to believe that gold is due for a pullback towards the
previous resistance level, now a major support, around $1000.
80
An argument for such a pullback can also be
70 made from the technical pattern formed on the
60 gold chart, over the last two years. Edwards
50 and Magee, in their technical classic regard
RSI 10 40
30 this pattern as a sort of inverted Head &
1200 Shoulder bottom. A majority of H&S bottoms
Gold 1100 mark major trend reversals. In contrast,
1000 inverted H&S bottoms appear as consolidation
900
patterns within a dominant uptrend. The
RS measuring formula (distance between the head
LS 800 and the neckline) projects an eventual upside
700 target of approximately $1300.
H
600
500
400