Like Magic, Gold Reverses
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The invisible hand of the markets showed once again why we call them “they.” We have all heard the expression -- they pushed the markets, they are buying -- and Thursday at about 12:25 p.m. EST when gold hit $1,303, they decided that was low enough and gold took off from our level of support and rallied $20 from the bottom.
It was like magic. There was no announcement. They just decided to buy and buy like crazy. The rally was short quick and powerful, causing a short squeeze, also attracting some new money. This is a common event, especially when they get too big on one side of the market or the other and the market goes ballistic -- in Thursday’s case up.
The rally was not more than a short-squeeze, dead-cat bounce from oversold conditions. Our lower target was hit, but the sharp rally indicates there is more room on the downside and the market may now break through $1,300 on the downside. Sharp moves like that usually fail and suggest the bottom is not in yet.
Keep those stops tight.