The Gold Correction

The pullback that the bears were hoping for and the bulls were dreading has happened in gold.  In five days, gold fell approximately 9% from its recent high of $1,227.  The great debate right now though is whether it’s simply taking a breather or was that the peak in gold.

I believe gold is still in the early innings of a long-term run.  The recent move did get ahead of itself.  I commented recently on my radio show that you simply can’t buy a chart that is heading straight as gold was in late November.  Now is the time to re-evaluate since we’ve had the correction.  Below is a picture of gold through the ETF streetTRACKS Gold Trust Shares (GLD).


The uptrend since the summer time is clearly defined here with the blue line.  Based on this, gold could continue seeing more selling pressure to roughly the 1090 area (equivalent to roughly $107.50 on GLD).  That would also be around the 50-day moving average as well.

The numerous reasons investors are buying gold from a fundamental standpoint haven’t changed.  In fact, the reasons are growing as we speak.  Therefore, I believe gold can move much higher over the next several months with pullbacks very similar to what we’ve seen so far.  Eventually, it will become a bubble.  But, we’re not there yet.

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4 Responses to “The Gold Correction”


  1. 1 Scott December 14, 2009 at 9:08 am

    Maybe a little off-topic, but is sugar (SGG) starting another run? It consolidated a bit, but looks to be advancing again.

  2. 3 Jon December 16, 2009 at 10:57 pm

    Hi Karl,

    I enjoy listening to your radio show and the insight you have. The internet medium I was using has lost the station stream so I am glad to listen to the podcast you have available, thanks.

    I was wondering if you have a technical estimate of where gold might run to in the future. I have heard 2400 all the way to 5600. Since it is new territory I find it hard to estimate a point where it will top out, or any stock that has broke out of the top trading range. I saw gold topping out at the beginning of Dec and sold my positions and looking to buy back in soon. Or maybe silver is a better trade.

    Thanks

    Jon

    • 4 keggerss December 18, 2009 at 7:15 pm

      If you look at the metals this year, they’ve appreciated in order of use. Copper 1st, then platinum, then silver, then gold. I think all the metals are in trouble right now with the dollar rallying. But, ultimately, I think gold moves higher and it’s hard to stay where it goes because as you said there is no place to compare it to. So, I’m going to continue to trade it that way we don’t have to worry about ultimate tops.


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