Greg Guenthner

Over the past week, gold has gone from zero to hero, breaking off an $80 run in just five trading days.

I’ve been bearish on gold since earlier this year. But I think this move could have legs. In fact, gold stocks might even move significantly higher before we finish out the year.

Here are the clues indicating gold might be undergoing a change of character:

1. Fakeouts lead to breakouts

On Oct. 15, gold futures plummeted to a low of $1,251. This drop signaled a clear break below critical support at $1,275. That morning, it looked like the floor was about to drop out. I suspected gold futures would soon test their late June lows of $1,179…

That’s when buyers stepped in. Futures haven’t looked back since. Here’s where we stand now:

After faking a move lower, gold futures have broken above resistance, posting the first higher low since early July. This could be a significant short-term bottom—especially since it was preceded by a false move lower.

Gold tries for higher lows

2. Miners try for a double-bottom

If you want to find an asset class performing worse than gold this year, look no further than gold miners. Investors have slammed these stocks all year. The group is down nearly 44% on the year. No one wants these stocks…

However, the chart is beginnign to look constructive…

GDX Market Vectors Gold Miners

The miner to metal ratio has been dismal all year. If this bottom holds, we could see miners snap back in a big way…

3. Sentiment is in the gutter

Just 10 days ago, CNBC’s gold sentiment survey revealed 83% of those surveyed were expecting prices to fall. That’s way too lopsided. Whenever you see sentiment get to these extremes, it’s time to start looking for a big move in the opposite direction.

So what happens next?

I think gold (and miners) can move higher from here. It will be messy. There will be big down days mixed with the initial thrusts higher. But right now, gold appears to be setting up for a solid fourth quarter.

I’m not ready to declare blue skies and new highs in gold’s future just yet. But something is brewing right now that could spark a significant move. If you’re nimble and you don’t mind big swings in both directions, this is your time to trade…

Regards,

Greg Guenthner
for The Daily Reckoning

Ed. Note: As long-time readers of The Rude Awakening know… Greg is no gold bug. In fact, this is his first bullish gold prediction all year. So when he changes his tune, it’s time to stand up and take notice. And rest assured, he’ll be following this story very closely in the days to ahead. So you’ll want to get his analysis before anyone else. Sign up for The Rude Awakening, for FREE, right here, and stay one step ahead of the rest of the market.

You May Also Like:


Gold’s Next Big Challenge in 2014

Greg Guenthner

The collective groan heard from gold bugs last year is getting decidedly quieter. With a solid performance in 2014, so far, gold seems to be turning things around. But is this a sustainable breakout, signaling a return to form for the yellow metal? Or is this merely a bear market rally? Greg Guenthner offers his perspective...

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

  • ds80

    Nice fake good delivery bars she’s holding.
    What incredible biceps and shoulder strength she has!
    And I especially like the seam on the one she’s smooching.

Recent Articles

3 Terrible Trades You Need to Know About Right Now

Greg Guenthner

Generally speaking, the Dow has been fairly boring as of late. A slight uptick here, a minor dip there... Nothing interesting, and certainly no sign of a major pullback. But, as Greg Guenthner explains, that's only half the story. To get a clearer picture, you need to look at the volatility in the small cap market. Read on...


The One Word Every IPO Investor Needs to Know

Jonas Elmerraji

When a big company IPOs, investors can hardly contain their excitement. In a flash of exuberance, they throw money at a company they've already decided is worth something... even if the market hasn't made up its mind yet. Today, Jonas Elmerraji explains how one simple word can change the fate of every IPO investor. Read on...


5 Min. Forecast
How to Spend $5.5 Million on a War You Already Won

Dave Gonigam

Baltimore was abuzz this weekend with parades, festivities, tall ships and air shows... And it only cost $5.5 million of taxpayer money! Yes, Saturday marked the bicentennial of a critical moment in the War of 1812 - the battle of Fort McHenry. And if you know of a better way to celebrate a war, Dave Gonigam is all ears...


The First Step to Self-Publishing Your Book

Chris Campbell

Want to self-publish a book? You can't afford to miss out on this series. Chris Campbell promises to deliver a step-by-step guide to self-publishing that leaves nothing out. Today, you'll learn how the most successful self-published book got to where it is today - and how you can use the same strategy to make your own book a success. Read on...


One Commodity Worth Buying Right Now

Greg Guenthner

While most of the commodity sector is getting beaten down right now, there's one commodity that's been on an uptrend since early 2013. And you're in luck... It's on a two-week dip in price right now, that could turn around any minute. Today, Greg Guenthner explains why this could signal a solid buying opportunity. Read on...