When Will We Know When Gold Has Bottomed & The US Dollar Has Topped?

Answer: Depends upon your definition of bottom and top.

For day traders, bottoms and tops are viewed and analyzed by the minute. For short-term investors, daily charts are scrutinized for clues to the next big swing. For intermediate-term investors, maybe the weekly charts are most important. And for longer term investors, perhaps the monthly charts are key.

I would like to think I am an intermediate-term investor for my clients. However, my trading track record points to a tendency to trade with shorter term horizons (using the Daily Charts).

So here is what I see for both the short term and intermediate term horizons:

1. Gold, Silver, and most commodity prices have now bottomed. US Steel (symbol X) posted a 12-year low at $15.68/share on July 27th, but it has since rebounded 31%! I see this price action in "Big X" as a significant leading indicator for commodity prices immediately ahead.
2. According to the latest CFTC weekly "Commitment Of Traders" (COT) report, Gold short positions currently held by Commercial Hedgers are now at the lowest since 2001. I view this sophisticated group as "smart money", and I see this latest COT report as additional strong evidence that a major turning point in Gold prices is here and now!

3. Precious metals mining shares are the single best buy on the planet right now.

4. The U.S. Dollar Index has topped, for at least the short term and probably the intermediate term.

5. China will succeed in its ongoing  massive intervention to support its financial markets and the overall Chinese economy (which fits nicely into my call that commodity prices have bottomed). Evidence of Government success is already being witnessed with the latest China customs figures which show that inbound cargoes of iron ore were 86.1 million metric tons in July from 74.96 million metric tons a month earlier and 82.52 million metric tons in the same month a year ago.

6. The U.S. Federal Reserve is NOT likely to raise interest rates more than two times over the next 12 months. While in my view "one and done" is the most likely scenario (1/4 point hike in the Fed Funds rate in December), Yellen & Company may feel compelled to chance a 2nd 1/4-point hike if the financial markets don't completely collapse after rate hike #1.

7. While I think the U.S. stock market has topped on both the short term and intermediate term horizons, I do NOT have any short sales on right now, so my conviction level with this call must not be very strong.

8. Precious metals mining shares are the single best buy on the planet right now. Oh, I already made that call in #3 above. In the interest of full disclosure, I am fully invested right now in a basket of gold and silver mining shares. While today was obviously a great day for my positions (my largest position was actually up 13% today), most of my precious metals mining stocks are still "under water" from their average purchase prices in each of my managed accounts.

Here is an interesting quote from Credit Suisse today:

"Optimism on the [U.S.] dollar is widespread, and our house view is for further dollar strength," Credit Suisse's Andrew Garthwaite said in a new note to clients. He noted that a recent Credit Suisse survey found that 70% of investor clients expected the dollar to continue appreciating over the next 12 months.

70% OF CREDIT SUISSE CLIENTS EXPECT CONTINUED STRENGTH IN THE DOLLAR! I read another survey recently that showed that Dollar bears may actually be less than 25% right now.

Of course, gold bugs have been totally discredited and overall sentiment in this hated asset class is probably the most bearish EVER! Hedge funds are actually SHORT on balance in the Comex gold futures for the FIRST time in history according to the latest Exchange report.

Here are three charts for your review:

1. U.S. Dollar Index (DXY) Daily Chart has now been updated with Friday's closing prices, August 7th. A daily chart sell signal has been triggered by my computer trading system at Friday's close, August 7th. The Greenback looks extremely vulnerable to a major correction here!!

2. Philadelphia Gold/Silver Stock Index Daily Chart (which shows that a computer buy signal was triggered today, Thursday, August 7th!)

3. Philadelphia Gold/Silver Stock Index Monthly Chart (which shows an 80% decline over the last five years since the top in December 2010)

U.S. Dollar Index (DXY) with 150-Day Moving Average Line and Computer-generated Buy & Sell Signals

Philadelphia Gold/Silver Stock Index Daily Chart with 200-day Moving Average Line

Philadelphia Gold/Silver Stock Index Monthly Chart with 200-Month Moving Average Line

Gold & Silver Mining Stocks: Powerful Daily Chart Double Buy Signals Today!

It's time!

If my computer trading system is credible, then today's price action in the precious metals mining stocks is exceptional and noteworthy. Daily chart double buy signals were triggered in the following gold and silver stocks: ABX, AEM, AU, GDXJ, GG, and PAAS. The daily chart double buy signal is one of the most powerful signals in my system.

For those who are reading my column for the first time, I've never been a "trend is your friend" trader or investor. In fact, most of my research is dedicated to the finding tradable tops and bottoms in the financial markets. The search engine within my computer trading system attempts to identify potential major turning points in stocks, bonds, indexes, and popular ETF's. I designed this search engine using 35 years of actual trading experience and dedicated research as my guide.

In the interest of full disclosure, my allocation to precious metals (PM) mining stocks is substantial right now in all my managed accounts. I was short the Russell 2000 Index against my mining shares, but I covered my entire short Russell position yesterday morning. Based upon everything I know about gold, the Dollar, U.S. stocks, and global financial markets, being unhedged long in the most hated asset class in the world right now (gold) is the right move. And my computer trading system is now screaming "BUY" the PM mining shares in the loudest of terms!

In my last column written a few days ago, I mentioned that one of the potential catalysts for a potential rebound in gold/silver prices might be a successful central bank effort to support China's stock market after its recent severe shakeout. The PBOC appears to be pulling out all stops in this effort now, and yesterday's rebound in Chinese stock prices looks promising. Of course, all that newly printed Yuan won't just go to buy stocks! Gold will be a big winner as well !!

According to the U.S. Mint (www.usmint.gov), July sales of gold and silver coins to collectors are approaching a record for a single month. For gold, 164,500 ounces of gold eagles have been sold. While the record at 209,500 ounces sold in April 2013 will probably not be broken, July 2015 sales with be the second largest ever. For silver, 5.33 million ounces of silver eagles have been sold so far in July. The total for the month is likely to place July in the top 5 months of all time.

As mentioned in previous columns over the last week, I now strongly believe that the selling climax in gold, silver, and related precious metals mining stocks has run its course and that a major bull market in this sector has just begun. The gold/silver long trade, especially in the miners, has all the potential to be the single best trade from here through the rest of the year!

Barrick Gold (ABX) Monthly Chart with Computer-generated Buy & Sell Signals