This is big news. The gold market has been rallying for the last three years. However, we now see that gold has broken below the three year trend line. This signals a reversal of trend. Also note this is the most liberal trend line available -- the trend line that connects the lowest lows of the last three years. Using a trend line that connects more of the bottoms yields this result:
In other words, no matter how you slice it, the trend has been changed.
On the daily chart, notice the following:
-- Prices are below all the SMAs
-- All the SMAs are headed lower
-- The shorter SMAs are below the longer SMAs
-- Prices have broken two trend lines. The first is the upward sloping trend line that started at the beginning of May and the second is the low point from early May.
Bottom line: this is a chart that has changed directions, indicating inflation expectations are dropping.
6 comments:
BD,
In addition to you, I read Chuck Butler's "Daily Pfennig" which I find very enlightening concerning global currencies. His perspective is that the dollar is currently being "propped up" and that eventually the props will fall and so will the dollar, thus raising both Oil & Gold.
I'd love to hear your perspective on this.
czarvoter:
I rather WISH this were the case. I bought some actual gold several weeks ago and am now down several thou.
I am still holding it in hopes that it will go up a little so I can dump it rather than be saddled with bigger losses.
I trade Gold on the GLD ETF and sold in the $920 (gold prices)and I'm looking for a bottom to get back in.
Hold tight, IMO none of the fundamentals have changed. The dollar has not really dropped so much as it's just up against other currencies... for the moment.
I don't know why many still consider gold as an inflation hedge or proxy, there is little or no evidence for it the past 30, 50 or 75 years. Gold is terribly illiquid, expensive to store and has lost it's 'intrinsic' luster.
While some doggedly try to hold on to it for sentimental reasons, look for it to return to its more normal s/d level of 400 to 500, unless we bomb iran where it will have another temp bounce.
I think the second trendline shown is likely to continue, and it is up about 55 pct over two years. Looks line now is a reasonably good time to get back in.
Trader John
I was thinking the same thing. I wish I had jumped at $795...
Shoulda, woulda, coulda!
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