Lately, I have been predominantly writing about silver and many of the fundamental perspectives which have broken down in silver. But I have had many requests to provide an update on gold as well. But clearly all my analysis for silver applies in gold.
For example, many gold investors and traders assumed that the Fed's announcement of further QE infusions were going to cause gold to skyrocket. In fact, I saw many analysts and advisors suggesting big bets on gold just before the Fed announcement. While I too was expecting a rally, I was also looking for a top to short, as I did not believe that gold was set up to break out just yet under even the more bullish perspective. Rather, I saw that rally as a shorting opportunity, which is what I advised my clients and subscribers.
Another example of old paradigms that have clearly broken down of late is the correlation perspective, wherein movements in other markets can be viewed to provide a direction for gold. The most common is the USD. However, that seeming correlation has broken down of late and does not provide insight into the movement of gold.
The other belief that I have attempted to dissuade investors from relying upon is the view that gold is a risk asset or a safe haven. In fact, gold can be viewed as either for a period of time, but because people can view it differently at different periods of time means that either perspective cannot be relied upon to be a constant basis for which to invest in gold.
Rather, as I have said over and over, sentiment is what moves the metals. I have written articles in the past trying to open investors eyes to this fact, and tracking the movements of sentiment has been the only methodology that has given us accurate perspectives for the movements in the metals of late.
As for GLD, I am looking for this move up off of the lows of January 4, 2013 as only a corrective bounce, which should resolve with one more decline yet to be seen. My target for the next decline is the $154-$155.50 region. This can provide us with an ultimate bottom in GLD before a parabolic rally begins. But, that region MUST hold as a support for this rally to have any potential of beginning.
For a break out to be confirmed in GLD, we will need to see a rally move beyond the $164.15 and $170 levels on strong buying volume. In fact, if GLD does hit that lower level, and if such level would be a significant bottom for it, then we should see a rally begin almost immediately on strong buying volume. So, confirmation should not take long if we are going to hit a significant bottom at the $155 region, which has serious potential for igniting the next rally phase.
But, until at least the $164.15 level can be taken out with strong volume, my long time target within the $141/$144 region may yet still be hit. So, GLD has an opportunity right now for a potential bottom, and we will await to see if it can capitalize upon it in the near term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.