Good weather, and thoughts on gold

by JDH on April 3, 2010

Welcome to April. In my corner of southern Ontario it feels like the middle of summer. The temperature yesterday hit 26 degrees Celsius (that’s 79 in American), and today is projected to be the same. Normal for this time of year is 9. Hooray for global warming. I spent part of Good Friday turning over the soil in my vegetable garden; that’s the earliest I’ve ever been able to do that. I even planted some spinach, lettuce, and swiss chard. And yes, I realize that a week from now they are predicting a high temperature of 5 degrees, so my fun in the sun will be short lived, but I’m taking full advantage of it.

The beginning of April also means it’s time to review our predictions for 2010. On average our readers predicted that the price of gold would be at $1,245, and the Dow would be at 11,117. The actual numbers? Gold was $1,113, and the Dow was 10,857.

So, we were optimistic on both the Dow and gold. Personally, I predicted that gold would be $1,300 per ounce (not even close), and the Dow would be 9,000 (not even close).

The winner of the competition was ChrisC, who predicted gold at $1,110 (a perfect prediction), and the Dow at 10,750 (very close). Congratulations. There are no prizes, other than our un-ending awe and admiration.

As for my portfolio, obviously I’m over-weighted in gold, so let’s hope gold is about to take off. Obviously I think it is. (Obviously, given my skill at predicting, I have no idea what I’m talking about). Here’s the chart (click to enlarge):

Obviously you can draw the lines however you want, but the way I drew them we are obviously at a turning point; the longer term uptrend line (in blue) and the shorter term down trend line (in red) are converging. Markets can’t go both down and up forever; one force must win. The big gain on Thursday in gold broke the red down trend line, and with an RSI at 56, and rising, I’m feeling quite confident with my position in gold stocks.

I’m not the only one. Some other guy on the internet also says gold is going up, so you know it must be true.

As for the markets in general, as I discussed last week (here’s the the S&P chart), 1,230 on the S&P 500 is a key Fibonacci retracement level. The S&P 500 closed at 1,178, so a further moderate increase is possible over the next week or two.

Or not. The jobs report on Friday showed a gain of 162,000 new jobs in the U.S., but compared to the 8 million lost since the recession started, it may be a meaningless number. The number of long term unemployed (for more than six months) hit a record of 6.5 million, and average wages actually dropped, so it will be interesting to see how the markets react on Monday.

Beyond that, given the good weather, and the holiday, I have nothing further to report.

Happy Easter, and see you next week.

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