The First COMEX Gold Spec Wash of 2018 Is Underway – Craig Hemke (07/02/2018)


by Craig Hemke, Sprott Money:

Back on January 18, we wrote a post predicting that another pullback in gold prices was on the horizon. Here’s the link:…

In that post, we projected this latest price swoon based upon the experience of watching net positions expand and contract on the COMEX. The chart below was drawn up that day, but w’ve added the most recent peak, which came a week later:

Just as in 2016 and 2017, 2018 began with a 10% rally off of a December FOMC rate hike. And just as in 2016 and 2017, we are now in a period of consolidation:

In 2016, COMEX gold moved sideways to gradually higher from February to June. Last year, the same pattern played out from February to July. Will we see a repeat in 2018? Probably—but not identical. Instead, expect the pullbacks to be shallower and the peaks marginally higher. The dominant chart is still the weekly one with the big smiley face or bowl. Here it is again for your viewing pleasure:

Obviously, the symmetry is impressive. But it doesn’t show a breakout coming until July or August. So, as in 2017, we must expect a series of highs and lows—CoT buildups and CoT washes—until a breakout finally comes this summer.

Until then, expect the dollar to remain generally weak with a range-bound USDJPY, too. Maybe we’ll be wrong about this part, but why would we reasonably expect much else?

And then the fun really starts in the second half of the year. That’s when we expect our Three Themes of 2018 to push to the forefront:…

• Political Risk : Will the Democrats take control of Congress in the November elections, and how soon would they move to impeach Trump in 2019? Regardless, with this election pending, the battles over spending, immigration and debt will only intensify.

• Geo-Political Risk : Hostilities increasing in North Korea, the Middle East and Ukraine.

• De-Dollarization Risk : Somewhat a part of geo-political risk, but this also includes the CNY-Crude and other developments.

How do you manage all of this on a day-to-day basis? With patience.

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