Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Investing, When to be Greedy?

Commodities / Gold and Silver 2012 Mar 08, 2012 - 03:07 AM GMT

By: UnpuncturedCycle

Commodities

Best Financial Markets Analysis ArticleThere aren’t many things that are certain in life, but there is one thing can be written in stone. Fear and greed run the markets! It’s been that way since tulips were all the rage. The problem with the markets is that you have to buy when everybody is fearful and sell when everybody is greedy, and that goes against human nature. With respect to gold this human defect is magnified to a much larger degree, and is complicated by the fact that gold is perhaps the only market where greed and fear can work together. For years I have tried to convince readers to buy dips and sit through the declines, but to little avail. Gold is the only market I do that with and for good reason.


The gold market is the most manipulated market in the world and investors are finally beginning to see that. What happened on February 29th is just one example, but perhaps the most blatant illustration that I’ve ever seen. Unfortunately I’ve put a label to it but I haven’t solved anything. I’ve been aware of the manipulation for years, since 2003 to be exact, and that’s when I started to by gold. Manipulation bothers me (like mosquitos), but I’m not afraid of it (like wasps!). Why? Manipulation can change the tertiary trend, modify or perhaps change the secondary trend, but has little or no affect on the primary trend and that’s the key. To beat the manipulators I needed to have time on my side and that means I must focus on the primary trend and use a buy and hold strategy.

How has this strategy worked? Gold has been climbing a wall of worry and doubt since the 2001 retest of the 1999 bottom. In the process it has carved out a profit each and every year since 2001:

YEAR         CLOSING PRICE             % GAIN

2001                        $277                                  9.1%

2002                       $343                                 19.3%

2003                       $417                                  17.8%

2004                       $437                                   4.6%

2005                       $514                                  15.0%

2006                       $636                                 19.2%

2007                       $837                                  23.1%

2008                       $865                                   8.4%

2009                     $1,106                                 21.8%

2010                      $1,410                                 21.6%

2011                       $1,575                                   7.1% 

Current                 $1,681                                  4.2%

Seven of the eleven years posted gains in double digits and that is much better than the Dow. In fact it’s much better than anything I could compare it too! Unfortunately there is a human problem whereby we are not conditioned to see the big picture (long term) and we all want instant gratification. My experience tells me that is a very hard nut to crack. I continue to receive e-mails from clients who jump in toward the top of tertiary moves and exit toward the bottom of secondary/tertiary reactions. One of life’s mysteries!

Every since the February 29th massacre I have received numerous e-mails from clients declaring “I’ve had enough”. In fact that’s been a theme since 2003 and if I had a dollar for each and everyone I received, I would be more than a few ounces of gold to the good! Still it solves nothing.  Out of the hundreds of clients I have I estimate that no more than ten subscribe to and implement the buy and hold theory. The rest try to catch the latest wave and fail miserably. As recently as Sunday I told investors that I see the following possibilities over the short run:

  1. There is a fifty percent chance that gold bottomed on Wednesday and the reaction was a one-day wonder,
  2.  There is a forty percent chance that gold will test good Fibonacci support at 1,676.50 early this week and then turn up, and
  3. There is a 10% chance that gold could run down as low as 1,659.30 before bottoming, consolidating and then turning back up. 

 I also said that regardless of how it plays out, it is not an earth shattering event and it does not warrant throwing away your positions in disgust. Yes, the reaction was made worse by manipulation but we’ve known for years that the market was being manipulated and we made the conscious decision to accept that risk when we purchased gold.

As it turns out gold did close at 1,675.70 yesterday, marginally below the below the 1,676.50 support and came close to testing the 1,659.30 support as you can see here:

This morning the spot gold is unchanged and trading in a tight 14.00 range as many investors wait for the next shoe to fall.

In the gold market one of the biggest problems we face is noise. By noise I mean useless commentary by ignorant people, or worse yet by people trying to purposely mislead. A simple chart would be a much better way to go:

Here I have drawn in two downward sloping trend lines, both connecting what were at that time all-time highs with lower highs followed later by breakouts to the upside. With respect to the higher of the two lines, I have labeled the breakout and you’ll see that this line now comes in around 1,622.00. In eleven years no breakout has every failed to produce a new all-time high so that’s your risk!

In money terms the risk is fifty dollars from the current price while the reward is a close above 1,923.70! If I am buying an April gold futures contract it’s five thousand dollars of down side risk, assuming I bought today, versus the probability of making thirty-one thousand dollars if history repeats itself. That’s the type of odds I like and look for when I want to buy. Aside from that note that yesterday’s close was marginally above the 200-dma and historically this is where investors buy. All the manipulation over the last eleven years hasn’t stopped investors from buying here, so you need to ask yourself why it should be different this time around. Of course the answer is that it isn’t!

With respect to Fibonacci support there are a series of price extensions that run from the 1981 all-time high of 850.00 and are really important. Here are a few of them:

SUPPORT             RESISTANCE

  1,671.50                       1,746.22

  1,596.86                      1,820.90

  1,522.18                       1,895.58

  1,447.50                       1,970.30

If you take the time to look carefully at the spot chart for gold, you’ll see that these are the Holy Grail of Fibonacci numbers and they invariably play an important role. For example the 1,895.58 resistance stopped the last big move (the all-time closing high was 1,900.10) while the 1,522.18 stopped the last big sell-off. These are no accidents!

I remain convinced that the 1,523.90 bottom experienced on December 29th was in fact the bottom and the current reaction is nothing but a second degree (seven to nine days) counter trend move that will retrace no more than 7.5% and then we’ll move on. Manipulation is part of the game, it is annoying, but it is never terminal. If you’re intelligent and buy where history tells you to buy, you may be slightly off but you’ll always end up on top and that’s what you want. History says that this is the time to buy! Your risk is minimal and the gains would be significant. Is there a risk that gold has in fact topped? Only if you believe that the world’s central banks, the Fed included, have stopped printing and will live within their means. I know of no one who thinks that will happen.

Bloomberg says that you should buy the paper assets (the dollar and bond) of the world’s largest debtor, the United States. Gold should be avoided because it is too risky. Enough said! My best advise to anyone and everyone is to buy gold, physical where possible, and EFT’s and futures when not. This is where everyone sold so this is the place to buy. The current 7.5% correction is now out of the way and that leaves no more than 3% corrections along the way to a new all-time high. This is where fear has set in and it’s where you need to be greedy. Easy to say and hard to do! I remain convinced that we are on the cusp of the single biggest investment opportunity of our lives. Unfortunately if you want life’s rewards you need to pay the price, a very unpopular message given the press and politics of today’s immediate gratification world. That’s why we elect the Obama’s and Romney’s of the world; they tell us what we want to hear. Gold is the reality of the situation and my best advice is to plant both feet firmly on the ground and buy!

Giuseppe L. Borrelli
www.unpuncturedcycle.com
theunpuncturedcycle@gmail.com

Copyright © 2012 Giuseppe L. Borrelli

- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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