Are you invested in gold, gold shares or thinking about it? Time to tune in to today’s update.
I’ve gone over the latest price action and believe I’ve nutted out where the gold price goes from here — in the short term, at least.
This is important. All too often hype and mania can blind us. Some prefer to call this the herd mentality.
We get sucked into a market that makes a big move. Then we make rash decisions. Often, we end up buying at the top of the market, for example. Bitcoin in late 2017 is a great example of this.
I want to touch on gold today because there’s a lot of renewed interest in the yellow metal after its cracking run earlier in the year.
I get it. It’s a commodity I’m invested in. Chances are, you are too…
I appreciate the yellow metal and have made a habit of buying physical gold each time I go to Asia (they have the best prices).
But I’m happy to trade gold and gold shares if they shape up, too.
For now, let me update you on what’s happened since the last time I wrote to you about gold.
It could’ve hit resistance
If you missed the August update, you can check it out here.
At the time, I made a simple observation that gold could hit resistance.
That was a good call in hindsight. Gold hit resistance and hasn’t done much since.
Take a look at the monthly chart below…
Do you see that blue arrow? That’s when I wrote to you about gold. As you can see, gold did indeed meet resistance.
You may be able to squint and see the closing of the green bar was below the red line I put in back in August. It was a weak close.
This gave me a high conviction to the idea and is one of the reasons why I’ve been able to sit idly out of trading gold to the long side since.
But I can’t become complacent! The moment I do, the market will make a fool of me.
So, let’s talk about idea number two. That was my last gold update for you in September. If you missed it, you can read it here.
Why Hong Kong was important
That time we observed the gold story from a different angle.
I looked at the Hong Kong protests and linked the current turmoil to the gold and silver rally.
In that update, I alerted you to the possibility of a top in gold and silver. I made this observation purely on the trajectory of the metals.
I took an outside view…
Here is what I said at the time:
‘It’s not new to suggest that both gold and silver are in a new uptrend. That is, the “bulls” are in control here.
‘The problem I see, though, is that the recent rally has been rather steep.
‘I want to see both gold and silver top out and consolidate over a few weeks.
‘The reason for this is that a vertical move up from here would be rather unstable. It could cause a sharp drop in price once the ‘fair’ market value comes back.
‘And that’s what I’m concerned about.
‘If you hold gold and silver already…reassess your exit strategy and consider increasing your stop-loss levels.
‘If you don’t hold these metals just yet, perhaps hold off and wait for the market to cool down a bit…’
Well, what happened the very next day?
Hong Kong leader Carrie Lam proposed to withdraw the extradition bill.
The gold price and Hong Kong seem rather interrelated. Coincidence…possibly.
Look at the daily chart below:
The blue arrow is the day I wrote to you.
You can see what happened after that.
So, what now?
Well, let’s take a quick squiz. If gold can fall lower than the low at US$1,464, which occurred on 30 September in the Gold Futures market. Then the next target is US$1,414.55.
This is simply 50% of the prior run from US$1,267 in May 2019 to the recent high of US$1,559 in September.
Let’s not get too carried away in what that means right now. I’ll fill you in through another update. Let’s just watch which way gold goes from here.
Then we’ll reassess if the bulls or bears are in control.
Right now, I’m preserving cash until a clear trend forms either way. I don’t think it’s done that yet.
Until next time,