Gold and Bitcoin – Both Looking Good

by JDH on July 13, 2019

Now that gold appears firmly ensconced above $1,400, let’s review the charts:

Here’s the conventional chart, gold, in US dollars, over the last three months.  An approximate double top was formed around $1,440, with a subsequent pull back to under $1,390, so gold must either break below $1,400 or back to $1,440; one of the trend lines won’t hold.

My guess; we’re going higher.

Here’s another perspective: gold, in Canadian dollars:

The chart looks similar, but there was no double top, but again, we have competing up and down trend lines, and unless there is some crazy movement in the Canadian dollar, a move higher is likely.

But how to play it?

I own gold stocks.  My biggest holding is EQX.V – Equinox Gold Corpp.

The chart is much less “pretty” than the gold chart.  After a spike to $1.40 in mid June Equinox has corrected back to $1.17

That’s disappointing, but I think it’s also a great opportunity.  Their production is increasing, and by the end of the year, if production continues as expected and if the gold prices increases, this is easily a $2 stock, perhaps higher.  I have a full position so I’m not buying more, but if I was looking for a stock to buy, Equinox would be on the list.

A higher risk/higher reward strategy is to buy NUGT – Direxion Daily Gold Miners Index Bull 3x Shares, an ETF leveraged three times to the underlying shares.  In theory, if the underlying shares go up by 10%, NUGT should go up by 30%.  They do it with a combination of shares and options.

It’s a short term vehicle.  Options decay over time, so it’s not a “buy and hold for 10 years” play.

I own a small position (I liquidated a bunch in mid June, at a nice profit).  I’ve had buy orders in at $24 that have gone un-filled, so I may have to up that to $28 to increase my position.  We’ll see what the world looks like on Monday.

Why is gold going up?

Who knows?  The conventional wisdom is that as the Fed lowers interest rates, the dollar weakens, and that strengthens gold.  Also, if interest rates are low, you aren’t sacrificing return by taking money from low interest bearing vehicles and putting it in gold (which pays no interest).

It is also a “safe haven” asset, good in times of risk.

Like Bitcoin.

And, sure enough, the chart of Bitcoin looks like the gold chart.

Bitcoin is much more volatile, so if you want to play it, put in orders $4,000 below market, and wait a few days and they’ll get filled.

(This is a chart of Bitcoin in Canadian dollars, as of 8:00 am Saturday morning; if you wait 10 minutes it will look totally different).

I am not a big Bitcoin holder, but if you want to diverse away from gold, have fun!

That’s the update.

I’m still short Tesla, and gradually liquidating my pot stocks.

Enjoy the great summer weather; more next week.