Last week we were looking for a big move in gold with a good chance that prices would either test 1550 or 1650 once the multi-week ascending triangle resolved. Sure enough gold made a $65 high to low move last week as prices tumbled below the key support at 1550, testing bulls’ resolve once again.
The most interesting aspect of Friday’s big gold rally is that it occurred very quietly, with hardly any fanfare. Moreover, if you consider that sentiment is extremely depressed and the vast majority of short term marginal market participants are leaning heavily to the short side you have the perfect recipe for a huge rally.
Rydex precious metals assets have hit the lowest levels since early 2009, this has historically proven to be a powerful contrarian indicator:
Large & small speculators continue to aggressively liquidate long positions in gold futures: