more articles by

Stewart Thomson

Click to enlarge Click to enlarge


Gold Correction Is Over, Professionalism Is Not

By Stewart Thomson      Printer Friendly Version Bookmark and Share
Jan 18 2012 11:04AM

  1. Probably the most critical part of investing is forcing yourself to remain professional in your actions on the price grids.  The nature of human emotion has not changed for thousands of years. 

  2. It is highly unlikely that today marks the beginning of any change in the emotional status quo of the human race.

  3. Unfortunately, I believe that January 17, 2012 could be seen as a day that marked the beginning of a new “price chase” in the gold market.

  4. Since December 29, the dollar price of an ounce of your gold has risen strongly.  The price has jumped almost $150, from about $1525 to $1667, basis February futures.  Investors are starting to feel the flow of “emotional juices”.  In the simplest terms, Sir Greed is coming back to gold town.   

  5. As gold prices soar, investors are measured by their ability to remain professional in market action, not by the ability to hold a dance party and wave mine reports in the air.   Those who sold out into the $1500-$1600 price zone lows will today begin to feel an emotional pull to re-buy their positions, before price “gets away”. 

  6. Amateur technicians are focused on the downtrend line on the gold chart.  The theory is that if this downtrend line is taken out on the upside, it represents a massive buy signal.  My view is that it is a siren on the rocks for price chasers.

  7. Let’s take a cold look at the gold chart, and leave our primal urges out of the picture.  Click this gold engages the dollar bugs in a battle for $1667 chart now. 

  8. Some investors will engage in a debate about whether they should just buy now, because if the red downtrend line is taken out on the upside, then the gold price could just “go vertical”.

  9. Some of these same investors knew (felt urges?) that gold was surely going below $1500 and sold out into the recent lows.  They will now have certain ideas (urges?) about what is supposedly coming on the upside. 

  10. The sad reality is that none of us are sure of anything other than death, taxes, and our emotional urges.  In this epic crisis, consistently following these urges with movement of risk capital could put you into a breadline.

  11. Try to focus more on horizontal price levels (HSR).  Horizontal support and resistance allow you to respond more professionally to the movement of the gold price, rather than making guesses about where it supposedly must go to from here.

  12. As of this morning, gold arrived at the horizontal resistance level of $1667 and has “engaged” the dollar bugs in battle.  Today is not a day of victory for gold against the dollar. 

  13. It is a day of battle, and you should be a very light seller of gold this morning.  Buy and sell gold with cold professionalism.  Today you should be either a seller or holding your ground.

  14. Chasing $200 of gold price appreciation with buy orders is simply not professional market action.  When your grocery store holds a sale, do you run through the store screaming at the patrons, “Don’t buy this sale, it’s a falling knife!”?  Sadly, that’s exactly what happened with gold, in a very big way, in the $1500-$1600 price zone.

  15. What matters most in the market is perhaps not where the price of your investment is going, but how you handle the journey to that destination, or the failure to get there.  Operating with as much professionalism as possible is your key to success.  Click this copper ultra-bull chart now.  If you are a copper bull, I would advise you to look carefully at this chart. 

  16. You are looking at a massive head and shoulders continuation pattern, with an upside price target of at least $8-$10.  I have long argued, almost alone, that the Dow would hyper-inflate as this crisis wears on. 

  17. The bottom line is that earnings don’t matter when money printing has enveloped the world.  “Dr. Copper” is arguing strongly now that the Dow should indeed skyrocket.

  18. Click this Dow Diamonds ETF chart.  The same head and shoulders bull continuation pattern is clearly evident on this chart that you see on copper, and projects that the Dow could rise to 18,000.  I think 30,000 is possible and probable.  

  19. Having said that, it doesn’t matter if the Dow is going to 300 million, if you can’t endure a 100 point decline professionally.   The key to building wealth is not to project your destination, but to endure the ride to it.

  20. Click this shorter term Dow chart now.  That’s a rising wedge pattern.  The good news for the Dow and gold stock bulls is that price has moved quite far towards the apex of the wedge, weakening the strength of this bearish wedge pattern.

  21. Still, the Dow has been crushing the dollar bugs for quite some time.  Stock market prices are extended in the short term.  A negative surprise in the Greek debt negotiations could see that wedge pattern activate, and rain on the “risk on” parade.

  22. Whatever negative surprises may await investors in the short term, the longer term “risk-on” asset charts suggest a huge fall in the dollar is coming in 2012, and huge rise in almost everything else is coming as a result of that fall.

  23. It’s theoretically possible that the risk-on assets could rise to the projected targets within this calendar year.  That’s not necessarily good news, as it would open the door to massive efforts to reign in those prices in 2013.  Commodity futures margins would likely be the mechanism to trip up the risk-on partygoers.  My strongest suggestion is to enjoy 2012 to the fullest extent possible, because 2013 may not be anywhere near so pleasant, and could make team “2008 again” think 2008 was a walk in the park.

  24. Click this silver blast-off preparation chart.  I’d like to see price remain above the green neckline of the small h&s pattern, but silver seems to be prepared, technically, for a substantial move higher, which is good news for those of you who bought it professionally and incrementally into this decline!


Stewart Thomson
Graceland Updates



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.