Two weeks ago I told you I was increasing my allocation to gold. Last week, after gold had it’s biggest one day drop in three years, I told you I was a week too early.
It would appear that I was at least two weeks too early, as the above chart of gold for the last three months would indicate. Gold did spike up to over $1,560 on September 3, but has corrected back to just under $1,500 now.
Is this significant?
I don’t think so. Gold is now back to where it was a month ago, and is still comfortably above it’s 50 day moving average, and well above it’s 200 day moving average, so I am not concerned.
In fact, with a Relative Strength Index at 46, a very good buy point is near.
“Near” but perhaps not “today”, as the RSI is still turning downwards, so a drop to the 50 day moving average around $1,478 would not shock me. I will postpone new buying for a day or two to see where everything shakes out.
Here’s a longer term perspective, a three year chart of gold:
That’s a much more decisive uptrend line, isn’t it?
This chart shows why I am not concerned. Gold had three years of congestion, but never fell below $1,000, and has very decisively broken out of that congestion zone.
After the great run it’s head, a period of consolidation is both necessary and healthy, so great, bring it on.
I’m patient.
I’ll wait.
The world is not yet paying close attention to gold. The news is all about how the markets will likely make a new all time high in the next week or two or three.
I agree, they will, but compare the three year chart of the SPX to the above chart of gold over three years:
The rise in the SPX is not as impressive, and certainly not as large in dollar terms.
Yes, the markets have more room to run, and they likely will, so having a position in the general markets is not a bad idea.
But we must also acknowledge that we live in a volatile world.
It appears that the trade talks with China are moving in the right direction, which is why the general markets are improving. It is also likely that interest rates are headed down, not up, which helps the markets, but that also helps gold. Gold doesn’t pay interest, but if your bonds are paying negative interest there is no penalty to holding gold.
So I will continue to hold gold shares until I am convinced that gold has not started a new bull run.
That’s the update. Let’s see if the title of next week’s post is “Three Weeks Too Early on Gold”.
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Two Weeks Too Early on Gold?
by JDH on September 14, 2019
Two weeks ago I told you I was increasing my allocation to gold. Last week, after gold had it’s biggest one day drop in three years, I told you I was a week too early.
It would appear that I was at least two weeks too early, as the above chart of gold for the last three months would indicate. Gold did spike up to over $1,560 on September 3, but has corrected back to just under $1,500 now.
Is this significant?
I don’t think so. Gold is now back to where it was a month ago, and is still comfortably above it’s 50 day moving average, and well above it’s 200 day moving average, so I am not concerned.
In fact, with a Relative Strength Index at 46, a very good buy point is near.
“Near” but perhaps not “today”, as the RSI is still turning downwards, so a drop to the 50 day moving average around $1,478 would not shock me. I will postpone new buying for a day or two to see where everything shakes out.
Here’s a longer term perspective, a three year chart of gold:
That’s a much more decisive uptrend line, isn’t it?
This chart shows why I am not concerned. Gold had three years of congestion, but never fell below $1,000, and has very decisively broken out of that congestion zone.
After the great run it’s head, a period of consolidation is both necessary and healthy, so great, bring it on.
I’m patient.
I’ll wait.
The world is not yet paying close attention to gold. The news is all about how the markets will likely make a new all time high in the next week or two or three.
I agree, they will, but compare the three year chart of the SPX to the above chart of gold over three years:
The rise in the SPX is not as impressive, and certainly not as large in dollar terms.
Yes, the markets have more room to run, and they likely will, so having a position in the general markets is not a bad idea.
But we must also acknowledge that we live in a volatile world.
It appears that the trade talks with China are moving in the right direction, which is why the general markets are improving. It is also likely that interest rates are headed down, not up, which helps the markets, but that also helps gold. Gold doesn’t pay interest, but if your bonds are paying negative interest there is no penalty to holding gold.
So I will continue to hold gold shares until I am convinced that gold has not started a new bull run.
That’s the update. Let’s see if the title of next week’s post is “Three Weeks Too Early on Gold”.