Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold & Silver Timing and Flexibility is the Key to a Successful Trade

Commodities / Gold and Silver 2014 Nov 19, 2014 - 10:49 AM GMT

By: Bob_Kirtley

Commodities

Background
Gold has not glistened since the summer of 2011 when a substantial rally took it to an all-time record price of $1900/oz.

Since then however it has been a one way trek south punctuated by an occasional weak rally or head fake. Gold’s inability to sustain a meaningful move to higher ground has been damaging to any portfolio that has acquired gold, silver or the associated mining stocks over the last 3 years or so. Gold’s bull market lasted for 10 years from 2001 to 2011 before its rally came to an end. One can be forgiven for expecting such a rally to continue indefinitely as the same data which supported the precious metals surge were more or less still in place. Gold’s fall from grace can be attributed to many reasons including the attraction of a roaring stock market, resurgence of the US dollar, cost of storage, poor sentiment, etc. Depending on the time that one entered this market determines ones current p/l position. Those who purchased gold, silver and the producers in the early years of this bull market will be sitting on handsome profits, assuming they had a buy and hold strategy. For those who are relatively new to this sector of the market it has been a roller coaster of a ride with values being in a progressive state of deterioration.


Bear phases are common in any bull market and this one has been persistent in its trek south. The bottom has been called with monotonous regularity by some of our peers in this industry; alas it has yet to materialize. The correct timing of this turnaround could make or lose a fortune for investors and speculators alike.

Gold has recently tested and penetrated the previous low of $1180/oz but managed to bounce back and trade at $1187/oz. Should the demise continue and the $1180/oz be penetrated once more, the stage for sub $1000/oz gold prices would be on the cards.

Timing gold’s change of direction
Before trying to determine gold’s direction it is first very important to understand the big picture which is subject to a number of constantly changing variables.  The race to bottom between the currencies being conducted by the major nation’s central planners plays a major role in determining the price of gold in that particular currency. The more their currency declines the more valuable gold becomes to its citizens. However, if the other major currencies are perceived to be weaker and descend faster than your currency then effect will be to push up the value of your currency, as is currently the case with US dollar.

There is also the interference in the markets by our political leaders who try to talk their own currency down as they appear to be of the opinion that a weak currency will boost their exports, improve the economy and ultimately keep them in office.

Over the last few years we have expressed our skepticism regarding gold’s capitulation which we described as a ‘capitulation of sorts’ and not a final one. A final capitulation has been somewhat thwarted by some of the perma-bulls who have consistently given ‘buy’ signals with every drop in price.

A lot of the weak hands have been driven out by gold’s lackluster performance and some of the stronger ones who still hold long positions must be having sleepless nights.

Gold, silver and the miners have been hammered as this chart of The Gold Bugs Index (HUI) clearly shows:

The HUI has fallen by 73% since making a high at 630 and has tested its lows of 2008 an important support level, but it has managed to scramble 30 points higher and now stands at 180.

If the HUI can hold above this support level then it will be a good base from which to rally and build the next bullish phase of this bull market. Should it collapse then we could see the miners test the ‘100’ level last seen in 2002.

The price of silver also needs to hold onto its recent gains in order to support gold prices and confirm that a new bull market is underway, however, having recently flirted with $15.00/oz, which we did say could happen; silver’s sparkle appears to have been lost.

On the bullish side we could argue that gold is becoming increasingly difficult to mine, demand especially from both China and Russia is growing as evidenced by the Russian central bank reporting an increase in its gold reserves by 150 metric tons of gold this year. We could list many more metrics and data points that normally propel precious metals prices to higher ground, but there is little to suggest that this bear phase in gold is over just yet. The difficulty is in identifying a catalyst that would ignite gold and silver prices other than a ‘Black Swan’ event which by definition is an unknown event.

Conclusion

In terms of what to do at this stage of the cycle we would recommend the following;

1.  Stay flexible and be prepared to trade either way, being a perma-bull or a perma-bear is far too ridged a stance to take in a volatile market sector such as this one.

2.  Decide on what you think the big picture looks like. Our opinion, for what it is worth, is that we are still in this bear phase and therefore we are looking to place short trades and puts on any decent rally.

3.  The current rally should be observed until it reaches your evaluation of a mini peak. As an example if we look at silver then a mini peak would be $17.50/oz. For silver to trade higher it would mean that it is forming a new higher high which would be healthy for silver, but if it doesn’t then the fall could see it trade sub $15.00/oz.

The next bounce in prices could be another false dawn disguised as a rally and we have had many of those over the last three years. Our preference is to watch the market and use any bounce in prices to establish short positions. It may be possible to trade the bounce with long positions but as traders we would need to be very nimble and move in and out with some speed and gusto, which in a bear phase is not the brightest idea.

At the moment we have 75% of our funds in cash and are comfortable with this position as it enables us to buy at cheaper entry prices or open short positions without feeling too pressured if a trade goes against us in the early days of its existence. By adopting a flexible approach whereby we can be bearish or bullish in any market sector, at any time, we have increased our cash position through short selling the weaker stocks along with the execution of some well thought out options strategies.

Got a comment, then please fire it in whether you agree with us or not, as the more diverse comments we get the more balance we will have in this debate and hopefully our trading decisions will be better informed and more profitable.

Go gently.

These are the key themes we are focused on at present, to find out more about what trades we are executing and how we are allocating capital in our model portfolio please visit www.skoptiontrading.com to subscribe. 

Bob Kirtley
Email:bob@gold-prices.biz
URL: www.silver-prices.net
URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in