Has the Gold Market Reached Its Temporary Zenith? Commercial Analysts Think So

A Kitco technicals featured analyst-writer, Clive Maund, has his finger well on the pulse of the international gold market. He is sounding the alarm, as large numbers of commercial shortsellers, among the best in the business by classification, dump their long gold positions.

Technicals confirm this move with a strident voice. Maund argues,

"There are 2 factors which taken together strongly suggest that gold is about to react. One is the RSI indicator shown at the top of the 2-year chart above, which remains at a critically overbought level. By itself this would not necessarily preclude further advance, as a commodity can remain very overbought for a lengthy period and yet continue higher. However, if we also take into account the fact that the Commercials’ short positions in gold have risen to by far the highest level for a year, with a corresponding ballooning of the Large Specs’ long positions, then a reaction would appear to be imminent. Before taking a closer look at the latest COT chart the point should be made that overall the gold chart looks strongly bullish, with a breakout to new highs, albeit still a marginal breakout, and moving averages in bullish alignment, suggesting that a major uptrend is still in its early stages. Thus, what we are concentrating on here is a probable significant near-term reaction to correct the current short-term overbought condition."

If you wish to see the charts for yourself -- and I advise that you do your own research -- here is the relevant page:

http://www.kitco.com/ind/maund/oct012007_gold.html

If you find this form of prognosticating disturbing for biblical reasons, recall the extremely important differences between prophecy, forecasting, elaborations, and inductions. Meteorologists are not prophets. Neither is Clive Maund. But he shows the marks of a saavy analyst, who heeds the right indicators for determining likely short-term trends. We all do this on a daily basis; we just do not all do this well.

Kitco features a variety of good articles written by analysts from varying perspectives. Have at it if you wish a second opinion.