Yes, I know that the SSI on gold got whipsawed with the April 2016 Green signal followed by the November 2016 Red signal. It happens. The SSI is, by design, a conservative indicator that prioritizes avoiding disaster and getting aboard long-term trends.
I feel more confident than ever that this new SSI Green signal is the start of just such a long–term trend.
Since hitting a low in late December, gold has been on a tear to the upside. After surpassing the resistance at the $1175-$1200 level, gold just broke through its next resistance level at $1275 and looks to be headed above $1300 in the very near future.
The open interest of gold futures contracts has rebounded off one-year lows. This is an important signal, because when open interest climbs, it means more players are getting into the market. When that happens, the price of gold tends to move higher.
Also, the commercial traders of gold contracts remain close to their least bearish positions in the past year. The producers of gold use the futures markets to lock in prices that are acceptable to them to ensure their profitability. When the commercial interests aren’t hedging much of their gold production, it means they expect gold to move higher…which it usually does.
The 8–year long term time cycle for gold remains bullish and shows that the path of least resistance is to the upside for the remainder of this decade.
Finally, there’s a strong negative correlation between gold and the US dollar. For more than a year, when the dollar moved higher, gold moved lower, and vice versa. The dollar made its most recent top in December just as gold made its most recent low.
While there remains plenty of short-term uncertainty about the fate of the US dollar, our long-term cycles forecast for the dollar are down.
A lot of the pieces of the puzzle are falling into place for gold today. The new SSI Green signal is yet another one. I know that a lot of you have been patiently waiting for a big move in gold.
I haven’t seen the stars align this well for gold in nearly a decade. I hope that all your golden dreams come true,
Richard Smith, PhD
CEO & Founder, TradeStops