Golden Week Begins

by JDH on September 30, 2017

This week China closes for a week, for its Golden Week National Holiday.  (I assume it’s true; I read it on the internet).

It appears that, for the last few years, the price of gold falls in the weeks leading up to Golden Week, and then bottoms and begins a recovery, which in the last four years took gold back up to where it began the period. (Full chart here). Apparently traders like to front run this period, and then buy as it unfolds.  If history repeats itself, gold, which closed at $1284.80 this week, should be back in the range of $1,330 to $1,350 by mid-October.

Of course you don’t need some elaborate Chinese explanation for gold action.  Gold is traditionally weaker in the summer, and stronger in the fall, so this price action is normal seasonality.

That’s why, this year, I played gold differently than last year.

Last year I made a ton of money in the first six months of the year.  Gold was going up, I rode it, and did great.

Then I kept riding it.

All the way back down.

As a result I gave back most of my gains.  Not all, but most, and that’s not good.

So this year, I held gold until the spring, and then increased my cash position, and even went to the short side, briefly (with JDST and DUST).  I have closed out all of those positions, and last week I got back into my favorite gold long position, NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS.  I started buying early in the week, and bought more on price weakness to average down.

NUGT closed the week at $31.84, but it was $44 in early September, so I see no reason why we won’t see $40 again within two weeks.  So, I have placed my sell orders at $36, $40 and $44, and I plan to sell all the way up.

Unless history doesn’t repeat itself.  Then I lose.

Time will tell.