If You Don't Own Gold, Read This Now
By Jeff Clark
May 29, 2009
It's time to take another look at gold.
When I last wrote about the shiny yellow metal, it was trading for about $910 per ounce. I suggested nibbling on the metal if it dropped below $900, and backing up the truck to buy if it fell close to $800.
We've had several opportunities to nibble since then as gold dipped below $900. But we never got to load the truck. Now, with gold at $960, maybe it's time to take a fresh look at the metal. Here's the chart...
Gold has support at $875 and resistance at $965 (both in red). It closed at $960 yesterday, so the metal is bumping right into resistance. Also, the recent action over the past two months has the look of a bearish rising-wedge formation (in blue). We've seen how bearish rising wedges tend to break to the downside, and that's a bad sign for gold's immediate outlook.
As a trader, I'm more inclined to sell gold here and look to buy it back if it falls closer to its support line.
On the other hand, there's no doubt gold is in a long-term bull market and the fundamental story behind investing in it has never been stronger. In fact, the fundamental story may be strong enough to break gold out of the bearish chart formation, hurdle it over resistance at $965, and launch it toward the February high of $1,000 per ounce.
So how do we reconcile the conflict between trader and investor? Easy... we hold.
Gold is in a bull market. We know that because the metal is trading above its 40-month exponential moving average, which defines a bull market for gold...
As long as this is the case, then the correct strategy is to buy the dips. Take advantage of price weakness to add to positions. Yes, there's a strong probability gold will break the rising wedge to the downside and slide back down toward support at $875. That'll be a great opportunity to buy more, because there's an even stronger probability that gold will be higher a few months from now.
Oh sure, aggressive traders can sell here and hope for a decline. If gold breaks out to the upside, then they can jump back in at a slightly higher price and still be in the trade. But most people don't have the psychological strength to buy back a position at a higher price.
Most people are better off holding through a short-term correction.
If you don't own any gold yet (what are you thinking?) then yes, it makes sense to wait for a pullback before starting a position. But if you already have a good stash of the shiny yellow metal, sit tight. A pullback is a chance to buy more.
After all, it's a bull market.
Best regards and good trading,
Jeff Clark |
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| • |
Natural gas reverses 9% off recent lows... it's the best "second chance" trade of 2009. |
| • |
Burger King losing the battle... fast-food chain makes fresh 52-week low as McDonald's inches higher. |
| • |
It's a huge bull market in gold miners... mining fund GDX up 30% so far this month. |
| • |
Earnings today... Quality Systems, Royal Bank of Canada, Tiffany. |
|
Last |
Change |
52-Wk |
| S&P 500 |
909.84 |
+2.57% |
-33.87% |
| Oil (USO) |
33.93 |
+0.68% |
-68.27% |
| Gold (GLD) |
93.74 |
-0.44% |
+2.75% |
| Silver (SLV) |
14.40 |
-0.69% |
-20.09% |
| U.S. Dollar |
87.95 |
+0.16% |
+19.30% |
| Euro |
1.40 |
-0.17% |
-11.32% |
| VIX |
30.75 |
-5.76% |
+57.29% |
| HUI |
375.21 |
-1.04% |
-14.96% |
| 10-Year Yield |
3.49% |
0.04 |
-0.31 |
|
| Company |
Sym |
Industry |
Vanda Pharma |
VNDA |
biotech |
Peregrine |
PPHM |
biotech |
Randgold |
GOLD |
mining |
Central Garden |
CENT |
lawn & garden |
Western Goldfields |
WGW |
mining |
RADVision |
RVSN |
telecom |
Global Brands |
GQN |
acquisitions |
Carmike Cinemas |
CKEC |
movie theatres |
AEterna Zentaris |
AEZS |
biotech |
Sharps |
SMED |
waste mgmt |
KongZhong |
KONG |
media |
3Com |
COMS |
networks |
Arris Group |
ARRS |
telecom |
SciClone |
SCLN |
pharma |
IAMGOLD |
IAG |
mining |
Capitol Acquisition |
CLA |
acquisitions |
Allied Nevada |
ANV |
mining |
STEC |
STEC |
data storage |
NeurogesX |
NGSX |
biotech |
CuraGen |
CRGN |
biotech |
AsiaInfo |
ASIA |
software |
SXC Health |
SXCI |
software |
Northstar |
NSTR |
medical devices |
Global Consumer |
GHC |
acquisitions |
AngloGold |
AU |
mining |
Universal Insurance |
UVE |
insurance |
Oculus |
OCLS |
medical devices |
Gander Mountain |
GMTN |
sporting goods |
ChinaCast |
CAST |
for-profit edu |
|
| Company |
Sym |
Industry |
Lexmark |
LXK |
printers |
Burger King |
BKC |
fast food |
KeyCorp |
KEY |
bank |
Laclede |
LG |
natural gas |
|
|
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