This is an interesting chart.  Very interesting.  Tell me what you see.  Your choices are:

  1. A triple top at just under $1,300, indicating significant resistance at $1,300, so it’s likely that gold will retreat back to the $1,220 level, or
  2. A break out, since gold traded on Friday, intra-day, as high as $1,306.90, before closing for the week at $1,291.60

Yup, it’s a conundrum.  Do you base your analysis on the intra-day high, or the closing price?  I guess we will know for sure in a week or two, but here are the arguments on both sides.

On the bear side, if gold was truly breaking through the significant resistance level it would have, and it would have closed the day at the new, higher levels.  It didn’t.  That’s bad news for gold.

On the bull side, there is no doubt that gold touched it’s highest level since, you guessed it, the night of November 8, Trump election night.  That’s a nine month high, and that’s not insignificant.

The other bull market argument for gold is that with all that is happening in the world, gold should be on a tear.  The US dollar is not strong, and typically when the US Dollar is weak, funds flow into gold, as they have done since the beginning of May.  The world situation is deteriorating.  Terror attacks are now commonplace. At least once a week some high profile person leaves the Trump White House.  Civil war seems inevitable, and more US troops in Afghanistan and other places also appears inevitable.

So why isn’t gold at $5,000 an ounce?

Good question.  I have many guesses.

First, the stock market, despite weakness this week, is doing great, near all time highs, and the broader averages are still up over 10% since the election of President Trump.  Unemployment (if you believe official government statistics) is low. Interest rates are low.  The economy is booming.  Gold is a crisis play, and the economy does not appear to be in crisis, so there is no reason for gold to be trading higher.

Second, what may appear to be upheaval in the White House may not be a bad thing.  Even though the Republicans control the Senate, the House, and have the majority of governors, and the White House, they can’t get anything done.  They all campaigned to repeal Obamacare, and they couldn’t even do that.  No tax reform.  No wall.  Nothing.  So isn’t this a disaster?  If you voted to “drain the swamp” then yes, this is a disaster, but if you consider politics to be nothing more than a reality show, this is great theater.  Nothing is happening, so no real damage is being done.

Yes, there are protests, and they appear to be violent, but has life in America changed?  Is it really any different now than it was five years ago?  I don’t know, I’m Canadian, but judging by the reaction of the markets, it’s status quo.

Perhaps the markets are happy that there is a “crazy man” in the White House.  Perhaps that’s what they want.

Gridlock is good.

So what are the investment implications?

I’m guessing that the next week will be a down one for gold, so I’ve taken a small position in DUST – Direxion Daily Gold Minders Index Bear 3X Shares, a bear leveraged ETF, and we’ll see what happens.  I bought it on Friday at $26.82, and I’ve placed my sell order at $34, good for two weeks.  If gold closes above $1,300, I’ll sell and take the loss.

That’s the plan.

(And disregard everything I say about politics.  Other than the fact that I predicted a Trump victory, I know nothing, so believe nothing I say).

Thanks for reading.  See you next week.

The Bull Market Lives

by JDH on August 12, 2017

Last week I pondered the question: Will Amazon Predict the Market Top?  Presumably if AMZN, a high flyer this year, gets into trouble, that could be it for the market.  This week Amazon touched $996, but couldn’t break through the $1,000 level, and by Friday traded as low, intra-day, as $951.38.

That’s not a great recipe for a continuation of the bull market.

However, Amazon did touch $930 back on June 9, so this is not yet an epic collapse.  Time will tell.

Apple, on the other hand, is looking great, hitting a new high in the $160 range earlier this month before correcting slightly. If I was a betting man, I would bet on a new high for Apple before the end of the month.

But, I’m not a betting man, and at these levels I have no desire to be the last man standing in a game of financial musical chairs, so I will watch from the sidelines.

Plus, it’s summer, so enjoy it.

If anything happens to change this vague analysis, I will report back next week.

Will Amazon Predict the Market Top?

August 5, 2017

The markets continue to set records this year, and a lot of market strength is due to one stock: Amazon. On the first trading day of 2017 Amazon traded at under $750.  On July 27 it touched $1,080, for a 44% year to date gain.  That’s impressive. However, since peaking at $1,080, Amazon corrected all […]

Read the full article →

Gold: Meandering for the Summer?

July 29, 2017

Gold had a somewhat obvious double top at the April and early June highs, so a drop from there was not unexpected. Of concern is that the correction down to just below $1,205 on July 10 was below the previous low of $1,214 on May 9.  “Lower lows” are not good to see if you […]

Read the full article →

The Bottom is in for Gold

July 22, 2017

Yeah, I know, I’m some guy who writes a blog every Saturday morning, the purpose of which is for me to keep track of my thoughts so I can remember my current strategy.  I have no greater insight than the guy next door, so why should my opinion mean anything? It shouldn’t, but since you […]

Read the full article →

Toronto Real Estate: Some Thoughts

July 15, 2017

The price of gold continues to meander, so I’ll get back to that discussion next week.  Today, since I’m writing this after a two day two of Toronto, where I spent yesterday walking various neighborhoods, I’ll give you my “on the ground, completely unscientific” thoughts on the real estate market in Toronto. As anyone who […]

Read the full article →

Nice Collapse for Gold

July 8, 2017

“Nice”, of course, is a relative term.  If you are long and leveraged in gold, the drop from the $1,294 level on June 6 to intra-day $1,206 on July 7 could not be described as “nice”.  A 7% drop in a month is not nice.  If you are looking to add to your positions, perhaps […]

Read the full article →

Gold at the 2017 Half Way Mark

July 1, 2017

So here we are, at exactly the half way point in 2017, looking forward to the start of the real summer vacation season.  Happy Canada Day, and Happy Fourth of July.  As for gold, not so happy. Over the last month, gold has traded in a range, roughly bound by $1,257 on the top, and […]

Read the full article →

Still Short on Gold

June 24, 2017

I’ll keep this brief, since I explained last week why I’m short on gold, temporarily. I’m still short, and the week started out great with that strategy, using JDST, a 3x leveraged bear fund. But then gold bounced up, and I finished the week essentially back where I started. So, on Friday, I increased my […]

Read the full article →

I’m now SHORT on Gold (Temporarily)

June 17, 2017

Yup, I’m short on gold. I still believe that by the end of the year gold will be trading higher than it is today, perhaps significantly so.  But, as I said last week in my post that it’s not looking good for gold, gold has some issues.  Let’s take, as an example, GDXJ, a security […]

Read the full article →