Gold: New High or Double Top

by JDH on July 25, 2020

For the first time since 2011, the price of an ounce of gold, in U.S. dollars, closed above $1,900.

The chart is very clear.  In August and September, 2011, gold traded marginally above $1,900 per ounce, and that was it, as gold entered a correction phase for the next nine years.  The bottom arrived in December, 2015, and $1,050, putting gold back to where it was in December of 2009.

But now gold has traced it’s way all the way back to $1,900, a perfect saucer formation, so the question is:

  • will gold form a “cup with a handle” formation?
  • will it blast through resistance, and quickly achieve a new high?
  • will it make a double top and correct?

I have no idea, but if you want a guess, I would guess that gold has had a big spike, and a pause at this important resistance level would seem likely.

$1,447 on March 16.  It closed on July 24 at $1,900.  That’s a gain of 31% in 4 months.  That’s not sustainable long term, so a pause to consolidate is likely.

NUGT, my favorite gold share trading vehicle, dropped to $23.47 on March 21, and closed Friday at $100.95

That’s a bottom to top gain of 330%.

That’s leverage.

But, as you can see from the chart, NUGT traded at over $210 in February, just before the stock market crash, so it has only recovered to half of it’s previous level.  Such is leverage.

Gold stocks show similar bounces.

EQX.TO – Equinox, dropped to $7 and recover to over $15 during that period, which again is a big increase.

Big increases don’t continue forever, which is why I’m guessing a moderate pause is in order.

So, I’m taking profits, building cash, and getting ready for the next wave.

I’m not selling everything, because I could be wrong, and gold may make a new high this week.

If it does, that’s fine, having some cash in my pocket is not a bad thing.

Stay tuned.  More next week.