In April of this year, gold suffered a big "smackdown" with the major selloff occurring in two weeks of relentless selling. August gold futures then bottomed at $1321, and it was time to switch to the long side where one could benefit from a $166 short covering bounce to $1487. Then came a retest of the lows that initially held. But when gold could not get any traction back above $1400, it started another "smackdown" lower. As we approach Friday, June 28th, we have fallen hard for another two weeks straight with hardly any bounce. Bulls have been devastated. Initially support held at $1220, but late today, gold broke down through $1,200, running stops. The selling continued through the early night session as August gold hit the $1180 support target and bounced. Peter Hug at Kitco thought $1220 would hold support, but if it did not, then $1,180 would. So far, he is right on the money. Gold just bottomed at $1,180 and is now trading back above $1,200.
It Is Time To Play Gold Again From The Long Side But Play Small
Running the stops today and tonight under $1200, and then bouncing, tells me that gold is in a bottoming process and one can now safely catch the falling knife and go long using mini or micro contracts unless one is extremely well capitalized. Even if we should sell off more over the next few days, down to $1150 or even $1100, by playing very small size, one can play for the big bounce that should begin at any moment. The April selloff lasted 2 weeks and this June selloff is now 2 weeks long as well. Being the end of the quarter, lots of money managers surely bailed out of GLD and GDX along with the miners, adding to the bearishness, as they did not want to be caught long anything in this sector when the quarterly positions are reported. Thus, we should start correcting back up next week, as it will be safe for money managers to buy back into this sector to take advantage of rock bottom prices and they will have a whole quarter before the next position reports go out. Again play very small size and be prepared to hold through a selloff down $200 to $1000. If your account can't handle another $200 selloff without going into margin call, then you are playing too big. I bought into tonight's weakness and am feeling really good about the trade. I am not giving advice for others to buy, only telling how and why I have now taken a long position in gold futures and will be playing the long side for the time being. I will update in the comments section how things progress.