Gold prices poised to continue breaking down
The precious metal could keep sliding until a major floor is found again.
By James Brumley
It's the proverbial pie in the face for traders who were sure gold was destined for higher highs.
On Monday, gold prices, along with the SPDR Gold Shares (GLD), plunged a stunning 2.3 percent -- the biggest one-day dip of the year -- when Portugal's debt crisis didn't cause the country to sink into the ocean and drag the rest of Europe down with it.
The closing price of gold on Monday was $1,306.70 per ounce, pulling the commodity's price to its lowest level since June 18.
Gold fell further on Tuesday but slightly recovered Wednesday. In morning trading, gold for August delivery was at $1,299.40 an ounce.
The $64,000 question is, of course, what's next for gold prices? Answer: most likely, more downside.
It may not be a popular stance. It's a stance the technical clues support, however, now that the market has been reminded gold is not as infallible as it was 2010 and 2011.
Truth be told, had gold futures not fallen quite as far as they did, it's possible this conversation wouldn't be necessary. With that last few cents of daily loss, however, gold prices slipped under a key support line (and a former resistance line) at $1,307. Now that they have, gold futures could slide all the way back to the early-June low of $1,240 before a major floor is found again.
But there's plenty of reason to believe gold will indeed find support around that level. As one can see when zooming out to a longer-term chart of gold, the $1,240 mark was the last springboard the commodity needed to kick-start the rally we saw unfurl in February.
Yet, if you take another step back and look at gold from an even greater distance, you have to wonder whether gold prices were going to implode here regardless of the reason. Last week's peak of $1,346 is the fourth node in a relatively straight line tracing all the major highs going back to highs hit in May of 2013.
Knowing that all charts tend to fall in line with the norm rather than become an exception to the norm, odds are good that traders would have found another good reason to dump gold.
See, more often than we care to admit, the market's action dictates the tone and topics of the news rather than the other way around.
Whatever the reason for the rollover, traders should embrace the reality that gold futures have been more prone to following through on reversal patterns rather than mustering long-term trends of late. And there’s little doubt that Monday’s action has underscored a pullback effort that started to take shape last week.
While there's a good chance we'll see a modest bullish pushback after Monday's drubbing, the damage has been done. Another lower close and/or a close under Monday's close of $1,306.70 could serve as the final nail in the coffin. Either way, gold futures have likely set their sights on $1,240. Should that level fail, the $1,190 mark comes back into view as a floor.
But what about the fundamentals?
To the extent they matter in the short run (which isn't much) to gold prices, they're already reflected on the chart -- the big retreat on Monday suggests near-term traders don't see any bullishness in the fundamentals.
It's unlikely that perception will turn around now that the plunge from gold has rattled its fans and followers.
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As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
Someone recently posted how gold has been this great investment for the past 50 years.
I posted a reality check with real numbers. Imagine that in this day and age, real numbers. Hmm?
I was told I cherry picked my start and end dates.
hmm. look at the 100 year chart yourself. Pick ANY, I mean ANY, start date for your analysis in the past 50 years.
1964 gold was about $250. 1976 gold was $450 (Nixon end the gold standard in the 70's)
So in 50 years your $250 is now worth $1250. In the same time the DOW went from 750 to 17000, and that EXCLUDES dividends reinvested. YOu do the math. Pick your dates!! Go ahead.
Only if you bought gold in 2000ish at $300ish can you count yourself a winner with gold.
So be brainless and thumbs down the post OR have brain and pick your dates and post them and the results here.
"Gold Peaked" in a "Panic Situation":
Be glad it's at $1,300.00 an oz..
Tis the season. Normally June being the worst month of the year with July not so hot either, a little pickup in Aug. to the best month of the year in Sept. as traders come back from vacations.
Lots of things going on around the world that could move gold either way on a moments notice. The list is getting longer.
Harry Dent sees a devaluing of all things down the road due to the worlds monetary action. Others see inflation for the same reason.
One thing for sure when the $ is dethroned as the worlds reserve currency There will be hell to pay one way or another. I will have a little gold and silver on hand just in case and have a few gold stocks for some profits as well. Well maybe.
Yeah, did anyone also notice there wasn't a WORD about the rise in gold and silver from the middle of June until now? But there's ALWAYS an article when the price of gold and silver DROPS. Looks like MSN has an agenda, in trying to make gold and silver look like a BAD investment.
Got news for you guys always putting gold down as if it was the stock market. MOST people out there buying gold, are buying for the LONG TERM. NOT the short term. Not saying they're right or wrong, but that's what they're buying gold for. The LONG term.
long-term investors (not traders) can comfortably build a 5% position at these levels and then sit back and await the inevitable return of inflation (possibly strong inflation) that will once again reignite gold price advances. in the meantime, pullbacks should of course be used as opportunities to re-balance the position back to 5% so that one is forced to buy low.
this position will be golden over the long term.
Gold a trade or a investment? Depends on your perspective. Lets take a look. 2004 to 2014 gold up 12%+ annualized, 20 years about even with S&P, 30 years S&P beats the sox off gold.
The important thing here is to keep an eye on the macro view and add or delete gold accordingly. Some gold, silver and gold stocks can improve your returns when held at the right times as seen in the last 10 year period. I don't call a 10 year period a trade. Gold stocks are of course more risky with bigger returns and bigger falls and don't always give you currency collapse protection that gold will. Stay profitable.
Active RIA, this may be gone to 2nd. page by the time you get to read...??
What you stated as your thesis, pretty much agrees, with what I mentioned;
Maybe I was not clear with my intentions or intended consequences....??
I attempted to start nothing, only how I feel about investing in or holding Gold and Silver investments, I know that you dabble (or more) in it for yourself or clients...And subscribe to the "conventional investing wisdom" about holding gold/silver in one's portfolios, which I agree with. ;)
Sedate, yeah probably; Because I don't get as passionate about investing as in the past, and don't like living on the edge of my seat...More into Value Blends, Large Caps and Mid caps paying solid or increasing dividends...With leaning towards speculative Growth in some Commodities and or Energy...Find myself doing less and less trading; 120-135 per year, mostly reinvesting dividends and some reallocations...
I consider Gold/silver a trading vehicle and taking profits in "appreciating time frames".
I kind of thought you referred to that.?
I'm still contemplating and have invested in Silver positions, but am not very knowledgeable.
Holding Gold "long term" for investing purposes over years or decades, really doesn't hold up well "against overall" small inflation increases and or investments in other Equities. Most are better.
That's according to what I have read or researched for about 10+ years.
Ironically,As a "store of value" Gold can provide solace as not to lose everything if the Financial World goes completely to hell, such as back in 2007-2008..Think gold dropped but returned to value?....It helped us, before and after the crisis... We did extremely well in trades.
Gold seemed to have "Cycles" over Decades of time frames, usually affected by Inflation, prices of other Commodities and or World turmoil, along with demand from Foreign Countries...India, China and now the Middle East, and of course the U.S.
Over the years, we have invested in 7-10 miners mostly Gold, Platinum/Palladium/PMs and now some in Silver..
Never much on Bullion, hard for me to deal with greedy fkn brokers/dealers...
But several years back got rid of all unwanted Gold/Silver Jewelry, Coins or bullion, that we didn't want to keep...(When Gold hit $800 an ounce).
As you attested to, buying Gold on dips or "dollar cost averaging" into it can be a good practice, but at some point in time I recommend "taking profits" (thought you said that too)?
That's the only way we have ever made money on Gold...
And if gold and silver rise again this year further, we will do exactly that...
Gold has been "quite calm" over the last couple years, so I'm hoping for a "breakout" maybe.?
With stocks in their long uptrend, Gold and Silver investments demand have been down.
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