(Kitco News) CNBC’s Jim Cramer has updated his outlook on gold, saying this is the perfect time to get into the gold trade after what he described as a “strange period” for the precious metal.
Cramer shared the disappointment many gold seekers have experienced after gold failed to deliver long-awaited returns this year after peaking at new record highs in March.
“It was a strange period for precious metals. I am a big fan of owning some gold as an insurance policy against inflation or economic chaos. Historically, it has been very effective. But in recent years, it has exploded in our faces,” Kramer said Wednesday.
Initially, Cramer blamed competition from the crypto space as holding back gold. But when the crypto markets collapsed this year, the situation did not change.
He said, “Last year we had inflation running rampant, and gold didn’t do much for you. I thought the culprit was cryptocurrency. People who hide their money in gold usually buy crypto.” “This year, the entire cryptocurrency ecosystem has collapsed. This means that gold doesn’t have much competition. We had insanely high inflation readings, the worst in decades. However, gold is basically flat all year.”
But with the public giving up on gold, it could be the perfect time to get into the trade, Cramer said, citing chart analysis by legendary market technician Larry Williams, famous for calling tops and bottoms in trading patterns.
“Williams finds that when the young speculators become very optimistic, it always indicates that we are close to a top. But when they get very downside, it’s always a sign that we’ve got a bottom on our hands,” Cramer explained. “According to the recent Commitment of Traders report, small speculators bought 92,690 contracts of gold, their smallest long position since May 2019, before we got a big boost in gold. In the past nine years, the higher their net long position was this low, and the higher actual metal, and the best selling points came when they had big buying positions.”
Cramer noted that last March, when gold peaked above $2,000 an ounce, these small speculators were at 200,790 contracts, their largest net long stakes in four years.
Kramer added that the price of oil is another great indicator of gold price movements in the future, noting that the precious metal tends to respond to changes in oil prices much more than any other inflation indicator.
“Pushing the oil price forward by eight weeks has been very strong for predicting the price of gold in the past. Based on the price of oil in the next eight weeks, Williams says that now is the time to buy gold. His forecast says you should be ready to rally here,” Kramer said. . “I know it’s been tough to bet on gold this year. But for now, the charts may finally be on your side.”
Cramer’s own view is not to bet on Williams when it comes to bottoming out gold. He reiterated: “The charts indicate that gold may be ready to go higher, and this could be the perfect time to make some buying.”
At the time of writing, December gold futures are trading at $1,804.40, an increase of $28 on the day. Since the beginning of the year, gold is down 1.45%. After the March peak, gold struggled to make gains due to aggressive rate increases from the Federal Reserve and a strong US dollar.
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