This weekly chart of gold above is showing that we are getting very close to a major resistance point at 1304. The weekly stochastic oscillator is also showing gold to be in overbought territory. This usually means a pullback should be expected within the next week or two.
According to the COT or Commitment of Traders report, the commercial banks have one of the largest short positions in history. In the past, this was a signal that the manipulators were getting ready to smash gold down, but with the recent revelation by Deutsche Bank and all of the scrutiny on manipulation now, it appears that manipulation is waning.
If so, what happened in the past, which the commercials have come to rely on, may not happen now or in the future. If that’s the case, then we could see gold continue to move up which would force all of these commercial shorts to cover and create one of the greatest short squeezes in history.
But we can’t rely on that happening yet, so we need to protect our recent gains in the event a pullback occurs. That means you need to tighten your stops on your positions to preserve your gains, but don’t tighten too closely or you could be stopped out too early.
Now, let’s look at the daily chart of gold below. In this chart, the stochastic oscillator shows more room to move up before reaching oversold conditions (Blue Line).
This might indicate that we will probably reach 1304, but it could go higher to the 1340 range before we get any pullback.
If we end up with a short squeeze, as indicated from the commercial short position, we will see gold explode to incredibly new highs and blow right past these resistance levels.
Next week will be an interesting week, so watch your stops and stay vigilant as we watch some historic moves in the price of gold and silver.