Gold. The Bull Is Dead. Long Live The Bear?
Long-Term Horizon, ETF investing, Macro, Portfolio Strategy
Seeking Alpha Analyst Since 2010
Mikhail Aristakesyan currently works as Head of Research in the Global Markets division of the Investment Company Finam, Russia's brokerage firm with the highest turnover on the Russian stock market and the largest active client base in the country. He has more than 20 years' work experience on financial markets in the areas of research and portfolio management. Mikhail holds two degrees: in engineering and finance from two top Russian universities: Moscow Aviation Institute and the Financial Academy.
After gold had have a really breathtaking 23% plunge in Q2 there are more and more voices that bull market is dead. Personally, I prefer long-term trends for trading and of course, having minus 26% YTD more than worth very careful consideration whether the bull market is really dead.
Let's start with technical analysis. It allows very quickly evaluate what is actually go on. Fundamental factors I will cover in the next piece.
Below you can find a Gold yearly chart. We have 12 years of rising prices. Yes, in 2012 we have not had new historical intraday maximum, but we got a new maximum close. This year looks like we will receive the first down year measured on a close to close basis.
On the chart you can see a rising channel from 1970 year and Fibonacci retracements from 2001-2011 movement. 50% level retracement currently very close to upper border of ascending channel. Therefore I believe that the most probable target of downside movement should be around $1086, but a spike to $889 (61.8% Fibo level) cannot be ruled out.
So, in my opinion, we currently have only correction, albeit a major one, and it is not the end of bull market. Everyone who has some trading experience knows that before major movement "weak hands" should be cleaned out. The bad news is that this correction in the worst case can take 2 more years.
Concerning recommendations what to do right now, I think it depends from the type of gold you are investing. If physical gold, then I think you can already cautiously start buying or adding to your positions. If ETF then I would wait for levels around $1100 and futures I will consider for buying only if and when the price drops to $900.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long non US Gold ETF.
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