Gold - REVISITED Weekly Buy Signal

By: GE Christenson | Mon, Feb 25, 2013
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On January 18, 2013, gold gave a "Weekly Buy Signal." I published an article stating such on February 7. Gold closed on Friday, February 1, at $1,670. The buy signal looked solid, the gold market had turned up, fundamentals were strongly bullish (in the assessment of many others and myself), and it looked like a beautiful sunrise after four months of darkness and downtrend in the gold, silver, and related stocks.

Sometimes it does not work out well. Examples are that gold buy signal and QE-4ever.

A golfer is normally pleased when he hits a mighty drive off the tee. Occasionally that drive fades a bit too much, glances off an unfortunately placed tree, and makes an unlucky bounce out of bounds. That golfer must hit another from the tee box, and this time he is "hitting three" instead of "hitting one."

Sometimes it does not work out well. Examples are that drive and timing the gold, silver, bond, and stock markets.

We learn something and move on. The facts, as I see them, are:


Gold Market Indicators

The weekly Stochastic and TDI indicators are extremely oversold - about the same as the bottom in 2008. They will probably turn up on the weekly chart with the March 1, 2013 data. Daily indicators are in a similar position - not since 2008 have they been this oversold. A rally is due and likely, but the indicators have not yet turned up.

Sentiment is overwhelmingly bearish. A rally is due.

The US government is still borrowing and spending like nothing can go wrong. The Fed is still "printing money" and, practically speaking, cannot stop without crashing the economy. This seems unlikely to change anytime soon. Debt increases are followed, on average, by the price of gold increasing.

If you are buying gold and silver for insurance, they are currently "on sale."

If you are buying for speculation, then the risk/reward balance looks highly favorable.

If you are buying for investment, then the "secret" is buy low, sell high. Gold prices are now "low."

If you believe the gold bubble nonsense, why are you reading this article?

If you want articles about gold being overvalued, irrelevant, a bad investment, and heading down, there are many to read. Here are three.

What does the chart show?

In my analysis, it shows a multi-year oversold condition that is an excellent setup for a substantial rally. The correction has lasted long enough that it has "worn out" and disappointed many investors. The "weak hands" have sold and that means the gold market is ready to rally.

Will it rally substantially from here? My crystal ball is cloudy, but the charts, sentiment, and fundamentals all favor a strong rally. Time will tell.

Other good articles suggesting a bottom is at hand:

Invest wisely! Paper or metal? Debt based paper or real money vindicated by 3,000 years of history? Keynesian money printing or gold in a private vault? A helicopter drop of paper or Gold Eagles in your hand?

 


 

GE Christenson

Author: GE Christenson

GE Christenson aka Deviant Investor
www.deviantinvestor.com

GE Christenson

I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice.

Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle.

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