Gold has rallied in the face of the recent selloff on world markets. That means the gold bear is over and we should back up the truck, right?
Let’s go back to “Technical Analysis 101”, folks. What do we see on the chart below? Lower highs, lower lows. Price is below the 200 day MA, and below the 50 day MA. Gold is desperately playing with support at $1200, without a clear sustainable move (more than a few days above) off of that price point yet.
Unless and until gold breaks $1270 and stays there for a bare minimum of 3 weeks (my rule of three, applied to a big-trend, means you need three bars on a weekly chart to prove a breakout) – then we can say the 200 day MA ($1270) has been taken out, along with the last short termed peak of $1250. Traders might want to think about taking a small position at that point, but investors should remain cautious before committing. From there, we want to see about $1350-ish taken out – that’s the last significant high. Investors could consider a position upon such a breakout.
At this point, none of the above conditions have occurred for gold. It’s still well entrenched in a bear market, according to the way I look at charts. Buy gold if you must, but I’d say you are taking your chances. Better off to go to a casino. At least the booze they offer you at a casino will dull some of the pain of the inevitable losses you will experience at their establishment. Gold trading brokers offer no free drinks to losing investors, yet the hangover from the losses must be as intense as that after a big night at the casino. I’m planning to “Arrive Alive”, as the DD campaign suggests, by avoiding gambling on gold – at least until the above conditions are met. Perhaps you should too.
I’m on BNN’s MarketCall tonight show a week Friday: Friday December 19, 2014 at 6:00pm.
We have a button on the ValueTrend website homepage that lists upcoming BNN shows and speaking engagements. That’s at http://www.valuetrend.ca/