All this recent market volatility has been good for at least one subject of trade in recent months…
Gold just hit a 3-month high after climbing up to $1,130 an ounce while Wall Street has been in a storm of growing fear and investor unrest.
There’s no denying that gold has begun to soar by looking at its performance in the New Year, but how long can its ascent last? Here’s a clue…
Who doesn’t love gold?
Even if you aren’t a regular investor in the precious commodity, gold is that wonderfully shiny thing that Hollywood bases movies about plundering pirates or ambitiously complex bank heists on.
Seriously, what’s the point of a pirate movie without buried treasure?
But the recent prices of gold are far from fictional. By looking at the SPDR Gold Trust Shares (GLD), which tracks gold, we can see that there hasn’t been much other than climbing happening.
GLD ended the last day of 2015 at $101 and has just peaked up over $108 in the past couple of days!
Now, gold is generally a bet against the market, so it’s no surprise to see it climb as stocks have tumbled. But the answer to the question, “how long can its ascent last?” could be the difference between making or losing thousands.
I’m looking at two main facts that are giving me a hint into this:
1. While I expect the market to head downward in the intermediate and long-term, it’s oversold and due for a bounce back right now. I don’t think it can reach a new high or even climb to recent levels before the latest drop-off, but any steady rise should limit gold’s rise.
2. When looking at the chart of GLD, I can see a clear trend line that reaches from peak to peak. That line has been consistently pointing downward over the past several years, and that means it would take a very significant effort to overcome that line and push higher.
Gold is set to rise above that trend line at some point (when the market fully enters bear mode), but right now it’s banging up against it without any signs of breaking through.
So in short, I think it’s likely that we’re at or very close to the end of gold’s recent climb…
Thank You