What’s next for gold?

 

Exactly a year ago, I wrote a blog providing a long termed view on the outlook for gold – it was entitled “Ignore gold’s trend at your own peril”. I suggest you take a look at the long termed chart that I posted on that blog. It shows the relationship between gold and the S&P 500. As I noted on the blog, it just aint gonna be pretty for gold investors over the long run. I also wrote a bearish article on gold in my  regular Investors Digest column around that time – the flack I got from a resident gold bug who writes for the paper was humorous. As I noted, all I want to do is make a correct trade through trend identification—I am not interested in thematic stories as to why any particular investment “should” go up.

https://www.valuetrend.ca/?p=2593

 

Long termed trends aside, I’ve followed gold over the past year in search for short termed trading opportunities. I don’t mind trading a counter-trend rally, even in a downtrend. There really haven’t been any such opportunities – in each blog (March and July of this year)—I noted that it needed to break its lid – marked by the top green line near $1400. Twice that resistance failed, gold never did break to the upside it needed to create an opportunity, so the trade was never available.

gold

Some readers of this blog may be wondering if gold is currently presenting a short termed trading opportunity. To answer that question- I’ll ask you to review the blue support line at the bottom of the chart above, and the break of that support line by gold.

Gold is still an ugly picture. Despite the ever-present potential for an oversold bounce on any bearish security, you will want to avoid this trade. If gold breaks above $1200 and holds for at least a couple of weeks, you might revisit the potential for a trade. The current target looks to be around $1000 if gold does not move up through $1200 quickly. I am not holding my breath while waiting for that to happen.

 

 

Keith on BNN this Friday November 7, 2014 at 6:00pm

Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]

Keith BNN

4 Comments

  • On Oct 15 you stated “At this point, the UNG gas ETF is trading in a range between $20-$22.50. A breakout on either side that lasts for a few days would lead direction to its next move. Until that point, I’d avoid this commodity.”
    So today Nov 5th UNG closed at $21.96. While I did go against your recommendation and took a very small position, I guess we wait until we see USG break $22, continue decent volume and stay above $22 for say 2 days. If so then you would be a buyer based on technicals correct?
    Do fundamentals come into play however?
    – weather for the next while is forecast to be warm, from what I see, so no great demand
    – inventories are still rising to the average and lots of capability to add more inputs.
    – that and for $natgas RSI is at 71 and Stoch at 91 imply we may be due for resitance, albeit maybe short term.

    My conclusion, take my short term gain and wait to see what technicals say in the coming days. Nothing goes up for ever right.

    Thoughts?

    Reply
    • Phil–I agree about your assessment regarding the $22 area as a dangerous resistance point, especially given the current overbought momentum studies you mention.
      My discipline insists that I hold off for a clean break though $22 for a few days, as you mention – on volume. You could run a stop loss, or take your profit and run at this point, either strategy is suitable depending on your view.
      Seasonals are supposed to be good for Nat Gas until late December, for what that is worth.

      Reply
  • Failed breakout in technical analysis happen often in TA and can drive you crazy

    Reply
    • I noted such an occurrence with one of my top picks on BNN last Friday–ECA–broke out, we bought, failed.
      It happens, and its all part of the game. Successful traders move on, keep following the discipline. Because more often than not, it works.

      Reply

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