Other than the rally on Friday after Janet Yellen’s speech, gold has done nothing since. It’s trading largely sideways between two, very short-term levels: $1,250 resistance and $1,226 as support.
But beneath the tight trading range, the trap is being set for the bulls.
First, gold remains overbought on most indicators, meaning it’s subject to a downdraft.
Second, small and large commercial speculators are still holding record long positions, while insiders – commercials – are near record short. That’s a bearish sign.
Third, my AI models continue to point lower, into late June.
I think the biggest factor right now is the debate over whether or not the Fed will raise rates again later this month, or hold off until July. That seems to have not just the gold market on edge, but the stock market as well, not to mention the U.S. dollar.
My view, based on all the charts and my AI models: The Fed will make its move later this month and raise rates.
From a fundamental point of view, it makes sense. The Fed is getting all the positive data-dependent info it needs to raise rates, the sole exception being May’s lousy unemployment figures.
But one month’s numbers don’t make a trend, and anyone who thinks the Fed is going to hold off on raising rates because of the May unemployment figures is in my opinion, smoking something.
In addition, the Fed does not want to be seen as political, so the longer it waits to raise rates, the tighter the bind it gets into.
Bottom line: Be patient. Hold all positions and related stops. Gold could drop like a rock heading into the June 21 period.
Best,
Larry
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