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Gold price reaction: tactics for exhilaration

Commentaries & Views

Oct 22, 2019

  1. If investors bring proper tactics to the table, gold price reactions can be exhilarating.

  2. Double-click to enlarge this GDX daily chart.

  3. There’s nothing more satisfying than buying a market near a low and selling near a high.

  4. The key to doing that is buying near a previous low, either with very small size or with a stoploss just under that low.

  5. In the case of GDX, the time is now to seize one such opportunity.

  6. Purchases of GDX (or individual miners) made now offer great potential reward with minimal real risk, if investors follow the trade size and stoploss rules.

  7. If GDX declines under the $26 area low, odds are high that the $23-$24 support zone gets tested.  If GDX holds above $26, odds are high that it rallies back to the $30-$31 area highs.

  8. An uptrend is defined as a pattern of higher highs and higher lows.  In an uptrend, buying lows doesn’t work consistently.  That’s because the price of the asset is constantly rising and rarely tests the lows.

  9. In contrast, a downtrend/reaction is defined as a series of lower highs and lower lows.  It’s just a matter of time before the price fails to break one of the lows and the uptrend resumes.

  10. Double-click to enlarge this daily gold chart.

  11. I recommend buying near the $1465 low, either with small size or with bigger size and a stoploss just under that low.  From here, gold is likely to either decline to the $1400 area lows or rally back towards $1566. 

  12. As stated, gold market reactions don’t have to be negative events for investors.  They can be exciting!

  13. I believe gold bugs are a special breed of person, with a natural zest for life.  With the right tactics, that zest can be maintained during all market action, whether it is up, down or sideways.

  14. Double-click to enlarge this US stock market chart.

  15. The same exhilarating tactics used at gold market reaction lows can be applied at US stock market highs. 

  16. My suggestion: Short the US stock market (Dow, SP500, or Nasdaq) near the recent highs, and place stoploss just above those highs.  The bottom line: October is the most dangerous month of the year for the US stock market, and it’s not over yet!

  17. Goldman analysts note a very concerning drop in stock buybacks.

  18. Corporate CFOs are concerned about the economic outlook and are cutting spending.  Also, leading American socialists like Bernie Sanders have proposed limiting or even banning the buybacks.

  19. These buybacks have been the lifeblood of the market.  Whether this is a final top for the US stock market is unknown, but I will suggest that now is the time to begin taking professional market action to profit when it happens.

  20. Investors who are uncomfortable shorting the market can purchase a “bear ETF” near the market highs.  A tight stoploss makes the trade risk minimal.

  21. Double-click to enlarge.  The buy zones like gold $1465 and $1400 are for “heavy hitters”.  By that, I mean that the opportunities are big, but they don’t happen very often.  Patience is required.

  22. For traders who want more action, my mellow and aggressive trade signals service may be the answer.  Keying off the GDX chart, we are almost always in NUGT or DUST and JNUG or JDST.  I run a tight ship, and when the next big run happens, the profits should be immense.

  23. If the next phrase in America’s trade war involves isolating China from the US dollar SWIFT money transfer system, I would expect the dollar to go into freefall and gold to stage a parabolic rise to $3000/ounce.

  24. I don’t think that happens, but continued de-dollarization is almost 100% certain, and that’s positive for gold.  Simply put, in 2020 I expect gold stocks to continue where they leave off in 2019; as the best performing asset class in the world!
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 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.