(Kitco News) - Gold got pummeled this week. The recent failed triangle breakout emboldened short-term speculators to sell on rallies. Swing and trend traders bailed out on long positions in gold after the market failed to hold onto the triangle breakout.
Trying to determine your next move in gold? Consider this:
- Smart traders buy low and sell high.
- Long-term investors of physical gold, buy low and hold for the long-term.
Who's Buying On The Dip?
- Asian buyers –Chinese and Indian citizens have proven to be price sensitive gold buyers. These market participants buy and hold gold for the long-term.
- Central banks – global central banks, especially emerging market entities have been snapping up gold in recent years to bolster official gold reserves and to diversify away from dollar FX holdings. These players are price savvy and patient buyers of gold. Central bank buying of gold accelerated in the second half of 2015, with a record 336 tons of gold purchased, according to the World Gold Council. That trend remained strong in the first quarter 2016 as central banks purchased 109 tons, the World Gold Council said.
- China continues to have a voracious appetite for the yellow metal and the country has been on a massive gold buying spree in recent years. The country now buys roughly 40% of all gold that comes out of the ground. According to recent data from the Census and Statistics department from Hong Kong, gold imports to China – through Hong Kong – have skyrocketed 700% since 2010.
- Individual investors. Demand for physical bars and coins has surged. American mint gold coin sales rose by 51pc in the first three months of the year against the same period a year earlier. Individual and institution players also dived into gold exchange traded funds – 364 tons in the first quarter.
Four Ways To Trade Gold
No matter how you trade gold, the metal is dipping now. Consider these plays:
- physical coins,
- gold futures,
- mining stocks or
- gold ETFs
Here are the key support levels to watch. See Figure 1 for a daily chart of the Comex June futures.
Gold Exchange Traded Fund
See Figure 2 for a chart of the Market Vectors Gold Miners ETF (GDX).
Gold Mining Stocks
In the wake of the first quarter reporting season, Credit Suisse hiked its target prices by an average 29% to reflect updated net asset value and cash flow estimates for Alamos (AGI), Eldorado (EGO) Franco-Nevada (FNV) IAMGold (IAG) New Gold (NGD) and Yamana (AUY).
Bottom line: Smart traders buy low, sell high. They scale into positions. Dips are used as buying opportunities.
What are you doing now?
By Kira Brecht, Kitco.com