A golden opportunity?

 

Gold’s seasonal bias towards a late summer-early winter outperformance is a little less predictable than other sector seasonal influences. That’s because the U.S. dollar and world political events can influence gold more than most other commodities or stock sectors.

GOLD

So, based on recent positive movements for gold, should we be looking at gold as an opportunity? My thoughts are—not just yet. Yes, the 200 day is flattening, and gold has penetrated it and the 50 day MA to the upside. And for those who believe in the significance of “golden crosses” (50 day MA going up through the 200 day MA)—that may happen any day now. While the recent pattern for gold is quite encouraging, you can see on the longer termed chart that gold needs to break a couple of very important resistance points to be truly out of the woods. First, the falling trend line  at around the mid-1300’s is just now being broken. Will this be a temporary break (also known as a “spike”), or will gold continue to move steadily upward?

The next point of resistance comes in a $1400. You can see the significance of that level on the chart. Gold found temporary support, and then later resistance at that level through last year.

I’m not keen to guess whether gold will hold above its trend line, and break $1400. Sure, if gold moves higher, I may wish I had bought cheaper. But I tend to view technical breakouts as my cost of insurance. Breakouts provide a  greater likelihood of a trend change in any security. Buying prior to a breakout is often a way of providing a nice exit point for current owners who are waiting to sell. Resistance on the charts is caused in part by investors and traders attempting to recover their losses. Rightly or wrongly, there will be some selling pressure by these traders in the coming days and weeks as gold takes its run at the levels mentioned above.

 

5 Comments

  • Hi Keith

    Great show on BNN.

    I know your chart is showing gold and not gold miners. Do you have the same opinion on the miners as bullion/gold? Knowing the cost to produce can impact profitability. Do you treat one as the leader or treat them the same?

    Reply
    • Good question Daryn
      XGD tracks the gold miners. They’ve lagged the bullion, as you mention due to cost of producing plus the effects of hedging (that some of them do). XGD is hitting $14 resistance as I write. If it breaks, that’s a positive thing. If not, back to the doldrums. I tend to trade bullion via one of the (many) ETF’s rather than go with the miners – there are less moving parts/more of a pure play on the chart if you stick with the bullion.

      Reply
  • I see xgd.to at 13.11 right now, last summer it made it to about 13.60 before collapsing, is that what you are watching keith?

    Reply
  • During your show at BNN you mentioned the TSX may be peaking earlier this year than normal end of April. Will you be lightened up the stocks you recommended (e.g. PPL, PKI, KEY) by then?

    Reply
    • Brian–we will be unloading some TSX listed equities in the coming weeks- but probably not the pipelines. I expect to be paying more attention to some of the small caps – possibly PKI – also the XCS I mentioned on the show is a sell candidate. Plus we will be unloading some technology holdings. We’re still going through our list and will make decisions as the markets dictate.

      Reply

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