Gold oversold: Time to be bold, or should it be sold?

January 13, 202118 Comments

 

The gold bullion chart (above) shows us a number of positive technical factors that might influence us to begin buying new, or adding to existing positions in the metal soon. Starting with the big picture stuff, working down to the finer details:

  • The uptrend that began in 2019 is still intact.
  • The 200 day moving average is supporting the stock.
  • A/D line at bottom continues showing positive moneyflow
  • Overbought conditions from late summer (per momentum hook-downs) have been rectified
  • Neartermed momentum stochastics has hooked up.
  • Moneyflow momentum (top pane), RSI and MACD are approaching turnaround levels

As an aside, I like silver too. The big picture on the silver chart suggests that if the current consolidation (the “handle” from the cup & handle breakout) breaks to the upside, there is considerable upside into its old highs near $40:

While momentum may be in the process of bottoming for these precious metals, we have a positive signal from the contrarian Sentiment OPTIX, courtesy sentimentrader.com. Anything below the green (bottom) horizontal line suggests the asset is oversold. You will note that the OPTIX has a pretty decent track record for buy/sell signals.

Finally, we should look at seasonality for gold. Note that the metal can be a bit weak over the final quarter of the year, according to the Equtiyclock chart. But January can signal the beginning of a very strong move for the metal.

Conclusion

Perhaps its time to consider gold if you don’t hold some in your portfolio. Producers are more leveraged to the metal, so you can consider either the commodity, or an equity position for greater leverage.

18 Comments

  • Gold and silver look to be in a consolidation pattern. My best guess is that they will go lower as they are both in downtrends. Both metals attempt to recover from last Friday’s collapse has been weak at best. I am looking at targets for April Gold $1820 and then $1800, March Silver $24.50 then $23. Time will tell.

    Reply
  • Hi Richard, what do you think of the thesis that rising interest rates are going to harpoon the commodity, PM and Energy trades?

    Reply
  • Good post Keith. I recently bought some XGD.TO ‘just in case’. With inflation a threat and what’s going on in the U.S., I wanted some exposure to gold. Gold is highly manipulated so it can be frustrating but eventually market forces should prevail?

    Reply
    • Well, the seasonal and sentimental studies suggest its possibly time to hold some exposure. We shall see.

      Reply
  • RELATIVE STRENGTH HAS BEEN WEAK FOR GOLD, for months now and shows no sign for turning up. Although it is holding 200d, it is weak. The daily trend line from the highs, tried to break up, but failed. Do you think the trade in Gold may be over.
    Interestingly, this all is happening on the back of very strong fundamental reasoning to buy Gold.
    thanks
    K

    Reply
    • I hold 7% between gold and silver miners. I expect some upside, a bounce off of support as it did recently. We shall see.

      Reply
  • Hard to understand why Franco Nevada (FNV) is getting so hammered and usually holds in there well during these resets because of less operational risk

    Reply
  • This is more an observation and general comment without much research behind it other than reading …. but it seems like a lot of people, traders, regular and professional, etc… are a little torn between what is happening with gold and silver in this instance versus Bitcoin…. Alot of us are expecting something good in PM’s soon but who knows right??

    I will never touch bitcoin with a 50’ pole just saying…

    P.s. great job on the upgrades and vids Keith…

    Reply
    • Thanks Matt–yes I know of the theory that Bitcoin took some moneyflow out of the gold trade when it rose…but bitcoin has pulled back, gold isn’t yet moving..so who knows if that theory holds water.

      Reply
  • Hi Keith, when you say owning the metal are you referring to an ETF type product like GLD on the us exchange? Is there a similar product on the tsx? I don’t have a us dollar account. Thanks

    Reply
    • Horizons has a gold ETF. Be aware that ETF’s tracking the commodity don’t match the moves precisely

      Reply
  • How many days after the August high was the time to sell, by what indicators?

    Reply
    • We reduced our gold position on an overbought RSI and stochastics signal plus the optix reading (sentiment) if I recall correctly around early September. We re-entered with one leg in December on stochastics signal. And have legged a small amount more in this week (this goes for silver/gold) on the optix signal. May or may not enter with more cash, undecided. We’re about 7% total exposure in the equity model (3 silver, 4 gold). Not sure if we bring that higher or not. We are in equities not the commodity.

      Reply
  • Hi Keith,

    What do you thing about buying bonds these days for retirement income. it will keep going up in the future. Thank you Keith for your fruitful information.

    Regards,

    Sam

    Reply
    • Right now, bonds are poised to see falling prices/ slowly rising rates. They do not protect against the very likely scenario of inflation in the coming 1-2 years as money printing continues. We hold some short termed paper and HISA in our income platform strictly to meet the needs of liquidity. Other than that, there isnt much upside on that play even for income investors.

      Reply

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