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Gold resumes march upward
Topics: gold, macro, news and views
For three days, I have watched this flag pattern develop in gold (the chart below is Dec futures but it should be equally apparent in GLD and other instruments):
These kind of flag patterns represent healthy pullbacks within a bull trend. In the strongest markets, the pullbacks don’t last very long. The fact that it only lasted three days signals that the gold rally has legs.
Because gold broke decisively out of the flag, I remain bullish. I added incrementally to longs in New Gold (NGD), US Gold (UXG), Rubicon Minerals (RBY), and silver futures. As discussed earlier, these positions are not intended to be a prediction that gold or silver is going to reach any particular target. Its just a recognition that gold is within earshot of all-time highs, and that this kind of momentum tends to persist (the trend is your friend until it bends, as they say).
My trading is discretionary, but most of the good trend trading mechanical and semi-mechanical systems will reach the same result. MarketClub — which I believe to be one of the best retail trend following systems — flipped long again today on gold:
A good case can be made that gold and gold stocks are overbought, but that doesn’t mean they will revert to the mean. By definition, every strongly trending market remains deeply overbought or oversold. This is not, in the humble view of one trader, a good place to flirt with countertrend trading. Yes, gold is up a few-fold from $255 lows early in the decade, but that is nowhere near a monster move for a commodity. Think of oil’s move from $10 to $140+, or wheat’s rocket from $2 to $12+. I have no idea how high gold will go, but as long as it keeps moving up I want a substantial part of my portfolio to be exposed to the move.
DISCLOSURE: long gold futs, silver futs, NGD, UXG, RBY and many other gold/silver stocks. MarketClub affiliate.
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[...] With gold consolidating so close to all-time highs, the deck was stacked for a breakout. While the pundits pointed out plenty of good reasons why the metal should sink, perhaps even sharply, the gold chart showed that the path of least resistance was higher. [...]
[...] With gold consolidating so close to all-time highs, the deck was stacked for a breakout. While the pundits pointed out plenty of good reasons why the metal should sink, perhaps even sharply, the gold chart showed that the path of least resistance was higher. [...]