Earlier this evening, at around 8:30 PM central time on July 23rd, gold futures suffered another sudden break similar to the one sustained last Sunday night around the same time. The front month futures contract plunged to a low at $1,072.30 oz before finding support. Last Sunday's crash low was $1,080.00/oz, so we now have a new contract low with this latest selling frenzy.
Chna's manufacturing PMI plummeted to a new 15-month low as just reported at the start of Asian trading this evening (Chicago time). The financial press continues to blame the general collapse of commodity prices recently, including Gold, on the apparent implosion in China's economy (and its stock market). There may be some truth in this narrative, but most of this information has already been discounted in current prices. In fact. it is my strong belief that commodity prices are generally deeply oversold on a technical basis, and that a strong rebound in most commodity prices is imminent. With respect to Gold, I think this latest smash to $1,072.30 marks the end of a vicious selling climax that will soon be followed by an equally ferocious rally and related short-squeeze.
Precious metals mining shares have been pounded relentlessly over the last 7 trading days, with some stocks down 35% or more to lows not seen since 2008. The price of Silver seems to be showing some relative strength when compared to Gold these last few days, but the expected rebound in precious metals (PM) stocks will probably be across-the-board over the next few days, weeks, and months. And going long PM mining shares right here may very well represent the trade of the year!
In the interest of full disclosure, in all my managed accounts I am long Gold & Silver stocks and short an equal dollar amount of the Russell 2000 Index ETF.
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