Bullion Charts and Commentary for Apr 30
posted Apr 30, 2004 at 07:50PM
My big successes in gold was in the first leg...when I got in on the bottom and basically held them until the May peak. After that, armed with "a little bit" of TA knowledge my record becomes one of missed opportunities. I do not know how many great entry points were squandered by getting shaken out too early.
A few of the things I have learned over the past three years and the gold markets
One the momentum indicators on the daily charts are near useless in a trending gold market. Weeklies are better and then only at extreme levels.
Price action trumps all other considerations. If gold breaks out of an ascending triangle..it doesn't matter if it is overbought on daily charts or COT is at record highs or jewelry demand has actually decreased..measured move targets tend to get hit.
Gold stocks DO lead bullion.
With that in my mind, I remain ambivalent about getting in a this point. The big fear of course is that the trend for gold has changed. All the charts show that the possibility that a 87 style top has been put in place.....BUT HAS NOT BEEN confirmed.
(Of course as a trader you try to anticipate...if you wait for confimation..then big moves have alrady passed you by.)
Looking at the gold miners one has no problem finding very bearish charts. Triangles being broken to the down side...head and shoulder neckline being broken...200 dma's being breached. The speculative explorers are just being decimated.
The extreme weakness of gold stocks even as the USD was hitting major resistance is another warning sign of a potential trend change.
Looking at the bullion charts above, my reading of the tea leaves says that gold has $350 in its future.
Is there a tradable bounce that can be played in between? I don't know..and because of that I won't play it..but watch to see if it develops into an affirmation of the bull trend. Perhaps the news from the FOMC meeting will provide a "catylist" that would support a sustained move up for golds.
Continued weakness however not only has negative connotations towards gold stocks, but also says that the reinflation game is not going according to plan.
A rising USD is technically feasible...even if it is freakish from a fundamental point of view. They are printing money like back in the days of Vietnam and have coupled it with a budgetary policy that makes Reagan look like an Austrian....At some point the USD is going to implode and you want exposure to gold..lots of it, when it happens
Watch and shoot