Gold Losing Its Luster

I'm back from Illinois after "life intervened" and I rushed out the door and gold has done exactly what I felt it would do.  In this previous post I felt that the 100 week SMA would pose a resistance and if you think about it, it makes complete sense.

  • From a season standpoint, gold doesn't have much demand until last Summer when Indian festival and wedding season kicks in followed by jewelry gift giving as the Winter holidays approach.  (see seasonal chart)
  • Inflation is very low = no need to hedge with gold
  • The stock market is challenging new highs.  When equities are doing well, not to mention the killer strong U.S. dollar, again there's no need to hedge risk with gold.

For all you gold bugs out there, dude, be a patient investor and wait for smart entries.

My guess is that gold will take out the low which has been tested three times and we'll see lower pricing.  For those who want to place bets on gold falling, I would recommend $GLL or $DGZ however beware; they are thinly traded so exits may not be as simple as some would prefer.  Of course there are always Put options.

Lastly, this thesis also applies to gold/silver MINERS in my opinion.  I would just stay away or look for entries to short although I do expect M&A to ramp up at some point and yes, there will be company failures as those names heavily in debt, cave in.

Will I want to buy it gold if it breaks the low or come late Summer?  Meh, only if the stars align.  There will be a time but for now, it's simply just not now.  I'll let the chart tell me "when". 

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