Golden Nuggets

Gold made a strong move higher as equity markets were dropping last fall. So now that equity markets are recovering is Gold giving back the gains? No. This is a real life example of how correlations change over time. How often do we make the mistake that what has been happening will continue to happen. This is known as recency bias. And it happens all the time.

This is a situation where following the pure price action can help you out immensely. Looking at the chart of Gold prices it is easy to see the strong trend higher from November through to February. Minor pullbacks along the way and then thrusts higher. The late February drop is what may cause differing views.

The price action following the drop to the March low is the issue. After a higher low and reversal to the upside the purists will see a healthy digestion and continuation. The doomsday crowd will see a bear flag and the risk of a second leg lower. This is what makes a market.

So which will be correct? Nobody can tell you for sure. Momentum favors more upside. But price is also at the upper Bollinger Band® so could stall. What may be more important is that as we approach Quarter end the price is hanging very close to the big round number 1300. Manage your risk and see what happens.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.