Gold Resumes March Upward

For three days, I have watched this flag pattern develop in gold (the chart below is Dec futures but it should be equally apparent in GLD and other instruments):

These kind of flag patterns represent healthy pullbacks within a bull trend. In the strongest markets, the pullbacks don’t last very long. The fact that it only lasted three days signals that the gold rally has legs.

Because gold broke decisively out of the flag, I remain bullish. I added incrementally to longs in New Gold (NGD), US Gold (UXG), Rubicon Minerals (RBY), and silver futures. As discussed earlier, these positions are not intended to be a prediction that gold or silver is going to reach any particular target. It's just a recognition that gold is within earshot of all-time highs, and that this kind of momentum tends to persist (the trend is your friend until it bends, as they say).

My trading is discretionary, but most of the good trend trading mechanical and semi-mechanical systems will reach the same result. MarketClub — which I believe to be one of the best retail trend following systems — flipped long again Saturday on gold:

A good case can be made that gold and gold stocks are overbought, but that doesn’t mean they will revert to the mean. By definition, every strongly trending market remains deeply overbought or oversold. This is not, in the humble view of one trader, a good place to flirt with countertrend trading. Yes, gold is up a few-fold from $255 lows early in the decade, but that is nowhere near a monster move for a commodity. Think of oil’s move from $10 to $140+, or wheat’s rocket from $2 to $12+. I have no idea how high gold will go, but as long as it keeps moving up I want a substantial part of my portfolio to be exposed to the move.

DISCLOSURE: long gold futs, silver futs, NGD, UXG, RBY and many other gold/silver stocks. MarketClub affiliate.

Comments

[Mad Hedge F...:]

uucn Those transfixed by gold blasting through the $1,000 level have been missing the real action in silver. The white metal has soared 57% to $17 since the beginning of the year, compared to only a 22% move for the barbaric relic, an outperformance of almost three to one. I have been a raging bull on silver all year, and on May 7, grabbed you by the lapels and shook you senseless if you didn’t buy at $12.70 (click here for earlier report ). It is nothing less than owning gold with a turbocharger. Silver gives you a nice double play. Its qualities as a precious metal are giving it a major boost from the flight from the dollar, one of this year’s certainties. It is also an industrial commodity, which unlike gold, is consumed, and therefore gives you a call on the recovering economy. If you don’t think this move is real, check out the shares of the silver producers. Coeur D Alene Mines (CDE) has rocketed by 57% this month and is up 144% YTD, while Silver Wheaton (SLW), and Hecla Mining (HL) have also done well. If you want to get set up on buying silver futures, e-mail me at madhedgefundtrader@yah... and I’ll tell you how to do it. To accumulate .999 fine silver dollars for only a buck over spot, or bullion at the lowest spreads in the market, visit mileniummetals.net by clicking here. How long will it take to get to the old high of $50? The Hunt brothers must be grinding their teeth.

Sep 13 06:53 AM

[Clint007:]

Since a long time I'm in New Gold and Rubicon, they are my best bet od Gold Stocks.
New Gold is now an Mid-Producer (with a little Copper).

Rubicon is not a producer, but with huge find so far; he's got one of the best area in the world: Red Lake Area Next to Goldcorp. Also the main shareholder of RMX is the Ex-President of Goldcorp and he know very well this area.

Sep 13 09:08 AM

[Donald Ingram:]

Watch out for the massive short positions being held by the bullion banks in both gold and silver - see my article this section for just how much. It will surprise you. Don't let them shake you out. Stay long the physical.

Sep 13 11:34 AM

[Bull Run:]

The US dollar seems to be at a cross road. 76 cents on the US dollar index. What makes this different than when the US dollar hit 76 cents almost exactly one year ago, is that a year ago the dollar did not break through the moving average, but now the dollar is significantly lower than the 50 DMA. If this drop deepens the next stop could well be, the 71 - 72 cents region. China seems very committed to the esculating trye war, and this could lead to China making a statement, which would be reflected in US dollar /Treasury pricing. All this bodes well for gold pricing. Barrick gold just spent a lot of money removing their hedges, so something is afoot.

Sep 13 12:38 PM