Contributed Commentaries
The Real Reason Behind The Gold Move Is Not What You Think, Extracting Profits Trade After Trade
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The real reason behind gold move is not what you think. It is the healthcare bill as I will explain later in this article. I will also show you how at The Arora Report we are extracting profits trade after trade from precious metals with a real live example of a trade that is in progress as of this writing.
In addition to taking very long term positions in precious metals, at The Arora Report we also selectively undertake short-term trades. Short-term trades are not for everyone, but those who can handle them correctly, profits can be substantial.
To fully understand the real reason, let us build the necessary background with three charts.
Please click here for the gold chart showing short squeeze after the Fed rate hike.
Please click here for the long-term gold chart.
On March 13th in Gold And Silver Ratings we wrote,
‘If gold does not go down on rate hike or there is no rate hike, aggressive traders may consider buying gold for a short-term trade using ETF GLD and or ETF SLV or equivalent in your country. Those who want to juice up the trade with leverage and are not comfortable with futures may consider triple leveraged miner ETF NUGT.’
On March 15th, according to the plan previously given, we entered NUGT trade. NUGT is a triple leveraged gold miner ETF. In accordance with February 13th post, many subscribers who are less aggressive entered GLD and SLV. We have taken partial profits on NUGT trade and holding the rest with a nice protective stop. Subscribers who traded GLD and SLV have followed similar partial profit taking.
The Critical Healthcare Bill, Connection To Gold
The next 48 hours are critical in passing the healthcare bill in the House. This bill will be Trump’s first real major success or failure.
Here is the connection to gold. Gold moves inverse to the dollar. The dollar has fallen due to the opposition of conservative House members to the healthcare bill; their caucus claims they have the votes to block the bill. The dollar strength pins on Trump’s success. The recent dollar rally, in part, is based on the hope of Trump succeeding.
On the flip side, Speaker Ryan says that President Trump hit the ball out of the park in persuading those House members who are opposed to the bill to vote for the bill.
In our analysis, the healthcare bill has better than even chance of passing the House. But please be aware that some insiders are claiming that the bill will fail.
We will know in the next 48 hours.
If the bill fails, dollar is likely to fall more and gold is likely to scream higher.
On the other side if the bill passes, dollar is likely to strengthen and gold is likely to fall.
Caution
To be successful, pay attention to the real reason behind the move and anticipate future scenarios on both sides. A deadly mistake we are seeing some investors make is to exclusively rely on traditional technical analysis using moving averages and oscillators. These used to work well when they were not widely available. However, these days, using these indicators alone is obsolete and results in losses over a large number of trades over a period of time.
What To Do Now
It is worth repeating that it is important to focus on the real underlying reason behind the move today and look at the probability of both scenarios going forward. Since the probability is not strong for either scenario, the best course of action is the path that we are already on. The path has been to take partial profits and raise protective stops on the remaining. This way if the healthcare bill fails and gold goes higher, we will participate in the move. On the other hand if the healthcare bill passes and gold falls, we would have already booked profits and will end up keeping part of the current unrealized profits.
A Special Note
It is important to note that gold is a complex global market. We have just shared with you the real reason behind the move right now. But many other factors can enter the picture at any time and change the scenarios.
Gold And Silver Ratings
The Arora Report precious metal ratings are widely used by bullion dealers, jewelers and investors across the globe.
The first cut of ratings on gold and silver at The Arora Report is generated by complex algorithms that automatically change with market conditions. Then human judgement is added before publication. Inputs to our algorithms include relationship between currencies, interest rates, sentiment, money supply, global geopolitical picture, global GDP growth, inflation in key countries, leading indicators of inflation, risk appetite, mine production and jeweler demand, smart money actions, speculator actions, and our proprietary technical indicators.
Here are our current ratings.
- Neutral in the very, very short-term.
- Neutral in the very short-term.
- Mild Positive in the short-term.
- Mild Positive in the medium-term.
- Mild Negative in the long-term.
- Positive in the very long-term.
These ratings are reviewed daily and changed frequently to help both long-term investors and short-term traders. For definitions of time frames, please click here.
Full Disclosure: Subscribers to The Arora Report are provided precise buy zones and sell zones as appropriate. Further, subscribers to The Arora Report may undertake short-term trading positions in addition to the very long-term generational opportunities.
