The Warning
As this blog is suppose to be my trading journal-in-training, please do not take any of comments as the basis of your trades or decisions.
The Drop
Just before the weekend, a massive $84 single day drop in the price of gold probably took the air out of gold bugs and speculators alike. No matter who you listen to and what you believe in, the last swing down on the daily chart probably spell what looks like the end of the stellar bull run in gold .
Doomsday chart full of technical indicators of fire and brimstone.
Let's look at the doomsday checklist for gold longs.
- At $1480, gold had lost 23% in value since it topped out at $1922 in Sep 2011 and is stuck in a weekly consolation range and a daily downtrend since then.
- Gold had dived significantly under the Death Cross (200 SMA and 50 SMA daily) after crossing it on Jan 28.
- The $84 single day drop on 13 April 2013 pulled the price out so much that any of the technical indicators will tell you not to touch this barbaric relic even with a 10 foot pole.
- It's far out to the south of any moving averages.
- Bolinger bands are pierced at the bottom through and through.
- MACD is showing moving averages cross over to the down side with a growing bearish acceleration.
- Slow Stochastics are heading down,
- There was a high volume of selling pressure on 12 April 2013 (Oanda internal volume, amateurs?). Long positions are being liquidated and and stops were triggered when the $1520-$1535 support was breached on the 4th attempt.
- Rumors of Cyprus going to sell 400 million Euros worth of gold will drive prices further down.
- The weekly bar is now a long red bearish bar worth -$110 and the daily bar at -$84.
Surely, this doesn't look like a good picture of a bull run, agree?
The Supply and Demand view
Alternative picture from the weekly chart point of view, with supply and demand zones.
Or maybe this is actually a good opportunity to get some shiny metals?
- Currently the gold price is sitting at the 61.8% retracement of the initial A-B swing to the upside. Fibonacci lovers might be interested.
- This also coincides with the weekly demand zone at 1460-1520, which is made of 2 daily demand zones at 1475-1502 and 1443-1447.
- The price came in fast and the drop is very good, which scores well for arrival.
- The price is at the bottom of the weekly consolidation range, with the weekly supply at 1757-1800.
- The next weekly demand is at 1306-1346, and it might never get there for a long time.
- April-May seems to be good months to get into a gold long, don't ask me why it happens.
- Aug-Sept seems to be good months to get into a gold short, I still have no idea why either.
- Good price target at $1800.
The Verdict
I took a long position with my online broker,
Oanda and placed an order for some bullion with
GoldSilver Central. It may look crazy to do so while the reversal is yet to be formed on the charts but dips in gold usually does not last for a long period of time.
If you are looking for a trade, XAUUSD and XAUJPY are good choices.
From the supply and demand point of view, it looks like a trade with a good chance of success On the long term, all major central banks are still printing like no tomorrow and they are not going to stop.
While the price was going below $1500s, I was trying to place orders for gold and silver bullion. Yes, I had grew a taste for physical shiny metals and was itchy to lay my hands on some.
Online bullion dealers like
GoldSilver Central and
Silver bullion were running low on gold and silver maples, koalas and eagles and the spot prices continued to plummet. It's strange that the spot prices for precious metals are falling like a brick into the ocean but the demand for physical bullion is at all time highs.
Silver bullion: 0 oz for sale? Wasn't this suppose to be a fire sale?
Don't bother with
Silver bullion, they don't have any gold bullion for sale at any price. Instead, I had bought the last Canadian maple gold coin off
GoldSilver Central inventory before I went to bed. It appears that what was happening on the spot market obviously does not translate into a fire sale for physical gold.
Let me explain using the screenshot of silver bullion. The reality is that there is a growing disconnect with the spot price and the actual price of precious metal people are actually willing to let go on their stock. For those who are not familiar with owning physical gold and silver, you can buy and store precious bullion with vaults such as S.T.A.R+ from
Silver bullion instead of keeping them at home. The S.T.A.R+ inventory status is saying that there are a total of 441,367 oz of physical gold and silver owned by people and they are not going to sell it to you at any price. The online shop had ran out of gold and has some silver left for sale. Demand had outstripped supply and yet the price kept falling. What kind of logic is that?
That's all, and good luck trading!
