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Friday, February 15, 2013

Message Clear But Emotions Make It Difficult to Read

Emotions see the following in the gold market:
  • Falling price
  • Falling price generates fear
  • Fear sees price falling further.

Pessimism towards and outflows from gold are reaching extremes.  Everyone, including the great gold contrarians, can't find even a 'technical' reason for buying gold.  This setup screams emotional capitulation.

The 13DEMA, a measure of money flows within the gold ETF, have fallen below 10%. This rare reading last generated at the height of the 2008 financial panic near the price bottom illustrates the extent of the capitulation underway in gold.  The obviousness of this bullish setup; however, won't be recognized until well after the fact at higher prices.  Today's sellers weakness will become tomorrow's chasers of strength.

Chart:  London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic Exponential Moving Average (13DEMA)



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