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.

Consider the following collection of charts:

Click to enlarge

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:


Gold Weekly:


Gold Daily:


And perhaps the most interesting chart of them all highlights the fact that not only did gold pass yet another test of major support at 1550 last week, but it also held above the key 36-month simple moving average which it has held above since the inception of the current bull run which began in 2001:


There is clearly a great deal of evidence which suggests that gold prices may have tested support in the mid-1500s for the final time in what may eventually be remembered as the quietest bottom in the history of the gold market. Even an equity market focused publication such as Barron’s has taken to highlighting the bearish sentiment and positioning in the gold market, going so far as to recommend that readers speculate on short term downside in gold via GLD weekly put options – a curious recommendation to say the least.

Only time will tell whether this will turn out to be a key turning point for gold, however, there are simply too many clues to ignore the potential significance of this moment.