Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Smart Money Heading Back into Gold?

Commodities / Gold & Silver Jun 18, 2008 - 01:10 PM GMT

By: Adrian_Ash

Commodities

"...The current lull in the gold market may signal a great chance to buy before the price moves sharply higher once more..."

WHAT YOU MAKE of the gold market right now depends on what you make of the kind of data UBS's precious metals team follow.


Big institutional players in the New York futures market slashed their bullish betting on Gold in the week to June 10th. Data from the CFTC – the US regulator – shows a net reduction of 11% in the long gold positions held by what it calls "large speculators".

And this "reduction in the gross longs maybe a further sign that gold is losing its attraction," reckon analysts at the Swiss banking and wealth management giant.

But less pressure from large investment funds could alternatively signal more loss of froth from the gold market since it shot 54% higher in the seven months to mid-March.

Topping out at a new all-time record above $1,032 per ounce – just as the Federal Reserve lent $29 billion to support J.P.Morgan's fire-sale purchase of Bear Stearns – the Gold Price has gone on to drop 15% of its value against the Dollar.

Versus the Euro and British Pound, the loss has been just as dramatic. And looking at the technical action on its charts, "any meaningful bounce from the 200-day moving average could bring back a lot of money into gold," the UBS comment goes on.

That's what "happened last year," it adds.

The 200-day moving average, as the name says, measures the average price of an asset over the last two hundred days. It's called "moving" because, as time rolls ever onwards, so too does the average – used by chart-loving technical analysts to see what the deeper, underlying trend is up to.

And why 200 days? Because that's roughly the number of trading days during one year. So the chart here, therefore, shows both the daily Gold Price as well as its 12-month trend. And you can see how the 200-day average has indeed acted as "strong support" during the bull market so far.

Well, kinda. Most of the time.

Nine times since Gold quit its 20-year bear market in 2001, the price has either bounced off or moved sharply higher through its 200-day average. The following surge – lasting an average of 21 weeks – delivered a 28% gain before the price of gold tipped lower again, back towards that ever rising up-trend.

The leap starting in late Sept. last year was the most spectacular, as UBS notes. By the top of 17 March 2008 , the Gold Price moved some 54% higher. Might that happen again now?

Two points to note if you're chasing the bull market in gold for short-term gains to shoot out the lights:

  1. Summer Lull – as the chart shows, Gold typically moves flat to lower during the middle four months of the year. And even as the global banking crisis hit in August 2007, a hugely bullish event for Gold's Safe Haven Appeal , it still took another six weeks before gold started to vault higher;
  2. Pre-Empting the Bounce – prior to last year's jump – sparked by the US Federal Reserve slashing the cost of borrowing below the rate of consumer-price inflation – the Gold Price had dipped below its 200-day average seven times during this bull market so far.

Buy Gold now, in other words, and a keen market timer might well have to endure a further drop first, even if the apparent magic of the 200-day average does come good once again.

But with the 200-day moving average now just above the $850 level, longer-term investors who've been considering a purchase – but were put off the huge volatility of 2008 to date – might want to stop waiting around. Precisely because larger investors are sitting it out, and precisely because technical analysts like the UBS team are pointing to a possible dip before advising you buy.

You see, that price of $850 marked the bottom of gold's fast & furious sell-off in March. It was also the previous bull market's top, hit just as Soviet tanks rolled into Afghanistan on 21 Jan. 1980 . So a return to prices below that level might actually signal a longer term drop. If the price is to push higher from here instead, a drop below $850 might be a long time in coming.

Hanging on for another pullback from today's current Gold Price and so trying to nick a little extra off your investment outlay might prove expensive, in short. If you're looking to take a position in Gold for longer-term or deeper fundamental reasons, the kind of low-profile flat action we're seeing this June could offer your best chance to get in.

Just ask anyone who tried to wait for a pullback once the last surge in Gold Prices had started in Sept. '07.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2008

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash 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

6 Critical Money Making Rules