Don’t Ask Me – I’ve Got No Clue

by JDH on March 29, 2014

Interesting week for gold.  By “interesting” I mean “quite the bloodbath”, eh?

On March 14, 2014 RGL.TO – Royal Gold Inc. traded at over $80.  On March 27, 2014 it traded below $69.  That’s almost a 14% swing, and this is a solid, dividend-paying, blue chip stock, not a junior exploration company.  The question, of course, is what’s next.

It would appear that MetalMeister over on the Buy High Sell Higher Forum predicted a smack down in gold and silver (which of course led Sidewinder to encourage him to “go peddle those newsletters“, but I digress).  Let’s look at two charts:

First, here is the chart since the peak, showing all but one of the down trend lines being broken (chart taken about two hours before the close on Friday).

RGLMarch28-2014

When will the last one fall?  I don’t know.  Of interest is the blue uptrend line; here’s a closer look:

RGL4MonthsMarch28-2014

If you get cute and draw the uptrend lines off the lows from the end of last year, the up-trend line got busted this week.

For the first time all year the stock traded below it’s 50 day moving average.

Should I be worried?

Was the rally since the start of the year a bear trap?  Is that it?

Perhaps.

MetalMeister’s link from above makes the case that an increase in shorts leads to the obvious conclusion that the market would be pushed downward, and that’s exactly what transpired.  Is it over, or will in continue?

As I noted last week, March is the worst month for gold stocks, by a wide margin, so a correction in March is to be expected.  Historically April is the second-worst month, although no where close to the depths of correction we see in March, so further weakness in April would follow the established pattern.

Gold stocks recovered considerably into the close on Friday, so is that it?

Again, I have no idea, but here is my big picture plan:

Gold, in the medium and long term, will continue to rise, and will rise considerably.  A down week, or month, or year (like we had last year), does not change the long-term, multi-year pattern.  Dips should be viewed as buying opportunities, and that’s what I did this week.  Some of my stink bids got filled, many are still open.  We shall see.

In hindsight I should have waited a few days to place my stink bids, because the stocks I bought at the start of the day on Monday were worth a lot less by the end of the day, but that’st he way it goes.  So be it.  I’m in this for the long term, so over time I’ll be in great shape.

That’s this week’s report.  Next week I’ll let you know how we did on our predictions for the first quarter; see you then.