>> Gold Makes a Move - Short Term Trade?
Gold made some smart moves this week. Lets delve into where it could be headed in the short term. This is a good time to keep an eye to see where it is headed, whether you decide to trade it or not.
(I) Gold - Continuous Contract
(Image source : www.stockcharts.com )
Gold has broken up from a long consolidation phase which lasted the last several months. As seen in the image above, gold has pushed through its 200-day moving average as well as the nice big triangle.
Since you cannot trade the continuous gold contract, lets find a way to trade this move.
(II) GLD - The gold ETF
Lets have a peek into what the chart for this ETF looks like:
Similar chart, not suprisingly - the consolidation, the break from the triangle, the volume spike and the MACD.
Seems like GLD is headed towards 92.5-93 in the short term. As always, dont forget to keep a stop-loss if you enter this trade.
Related article - GLD's assets grew by 29% in 2008, read here.
PS - This continuation or a failure of this upmove would reveal where gold is headed in the next few weeks. We stand at a crucial juncture.
Labels: Gold, Historical Posts
posted by KaranZ at 11:54 AM
3 Comments:
Hi,
1. What makes you think that Gold would be a smart choice??
2. Could be a very short term spike ??
3. People are consolidating in gold due to the Global meltdown?
4. Is this a new currency for this period?
5. Has the consumption increased or just a speculation that this is better currency and wont go down even if banks go down due to slowdown ?
I have invested in Gold funds..Mutual funds !
cheers,
Saket !
I am glad you asked. Thanks much for accepting my request to take the time to post a comment on the blog as well - hopefully it will spur more discussion.
>> 1. What makes you think that Gold would be a smart choice??
Gold has historically been an inflation hedge due to an excellent long term store of value (another blog post coming up :) ). Additionally, fiat currencies are likely to fall in the months makes gold a nice hedge of some sorts.
>> 2. Could be a very short term spike ??
Thats what it seems for now. Whether this could be a long-term trend lasting anywhere from a few weeks to a few months will be seen in time. Elliot wave seems to indicate we could be in the fifth wave.
>> 3. People are consolidating in gold due to the Global meltdown?
Fear of currencies loosing value. See what happened in Iceland; the british pound is collapsing now. Anyone who was holding the pound would have been served well be moving into gold, as a chart of gold v/s the pound would show.
>> 4. Is this a new currency for this period?
Not likely - that would require mass paronia and doomsday predictions coming true. More than gold, its the USD which is likely to hold up for a few months - after which the fundamental reasons (US Govt printing money et al.) should lead to a long term decline.
>> 5. Has the consumption increased or just a speculation that this is better currency and wont go down even if banks go down due to slowdown ?
Consumption increased by 29% last year alone. A part of this could be due to speculation of an alternate currency. Production in gold mines is close to the lowest level in more than two decades.
However, ironically the rise of the US dollar coupled with muted inflation could kill the rally in gold. Time shall tell :).
Cheers,
KaranZ
how is Gold behaviour now ??
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