Gold is adding to its gains from the Asian session last evening in impressive fashion as the climb today has been steady and methodical. It has all the appearances of a strong short squeeze accompanied by an inflow of new long positions, which is exactly what this market has been needing to propel it higher. If the specs start falling back in love with gold again, the rally will have further to run.
It is not hurting things that the HUI is roaring higher today! It is up over 6.5% as I type these comments so gold is firing on both cylinders right now.
A quick take on the gold chart.... note that price has run exactly to match the downtrending 50 day moving average. That is a big level that the funds watch closely. Gold has not been above that key average the entire year and only briefly when it last poked its head above there back in November 2012. If the 50 day moving average cannot hold it, then we will see even more short covering with that hedge fund short position looking quite vulnerable. It is do or die time for those funds playing the metal from the short side. They either hold it here or they will be forced out.
I included a graph of the RSI down below to show you that this is the strongest up move for gold this entire year based on this indicator. It has also matched the highest reading that occurred back in November of last year when it was last above the 50 day moving average.
Combine these and it is evident that the metal has forged a bottom on the chart back at $1180. Now whether or not this thing can start a sustained uptrend is unclear but certainly, a strong push past that 50 DMA is going to take it much closer to so doing. I would also like to see the RSI exceed the 60-65 level and push up towards 70. Bear markets do not normally reach the 70 level.
I noted a band of overhead horizontal chart resistance to show you that the market has now pushed into a region where technically, it can be expected to encounter selling pressure. If the bulls can absorb this, and thus far they are holding their own here about midway through today's New York session, then the bears are going to lose their grip.
Silver has been pulled higher by gold and has pushed past stubborn resistance at $20. Further helping it along is strength in old crop soybeans which are being fueled by more talk of dryness. Grain bulls have been crying up too much water, not enough water, everything they can in order to convince the world that the crop is terminally dead once again. This may be the last gasp for soybean bulls however. If we get some moisture soon, then they are in trouble. If not, prices can run a bit higher but the fact remains that we are going to have a big crop this year and US soybeans are too expensive on the world market. It is domestic demand that is supporting the market for now.
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