Some Not So Deep Thoughts On Gold

From the "Department Of It's A Sure Thing", we have, once again, investors being told that an asset is a sure thing just as it is making new highs. Yes, they tell us it is different this time, but how many times do you have to hear that to realize that it is never different? The reasons to own gold at $1200 are the same reasons to own it at $1000 an ounce or $800. But like every asset, nothing goes straight up. I would rather be a buyer at lower prices (and I was) than higher.

In any case, here we have the infamous Jim Cramer making the "sure thing" call on gold, and all the reasons he gives to rush into gold have existed since, well, the beginning of time. I am not a breakout kind of buyer, and I would rather make my purchases of an asset when they are lower and off everyone's radar. It is just my style. Based upon the technicals (not Cramer's ability to market time), which I will review below, I reduced my position in the SPDR Gold Trust (sybmol: GLD) by 60% this morning. You can see my real time portfolio by clicking on this link: PORTFOLIO.

Figure 1 is a monthly chart of the SPDR Gold Trust (symbol: GLD). The pink labeled price bars are negative divergence bars, which imply slowing upside momentum. Typically, the highs and lows of these negative divergence bars will lead to trading ranges. Currently, price is only at the high (119.54) of the recent monthly negative divergence bar or at the upper end of what is likely to be a trading range. A monthly close over this level would be the "breakout" and suggest that this time is different as traders who are short cover their positions. My guess is that we will need some time before mounting this hurdle.

Figure 1. GLD/ monthly

Figure 2 is a weekly chart of GLD. Negative divergence price bars are identified, and we note that the current weekly price bar is a negative divergence bar (pink bar within gray oval). This price bar has a low of 118.61 and a high 121.12. In addition, if this price bar becomes a negative divergence, we are starting to see a cluster of negative divergence bars, and this implies we are towards the end of a price move rather than at the beginning. (See the negative divergence bars to the left of the graph). Support would be the low of the current negative divergence bar, but I definitely would not want to see GLD close below key support at 115.07.

Figure 2. GLD/ weekly

Figure 3 is a daily chart of GLD. 118.96 is the first level of key support and as I type, price is flirting with these levels. The next level of support is at 113.55.

There you have it! Some not so deep thoughts of gold. From this perspective, the fundamentals continue to be the same. It is just a matter of where and when you (not me) want to buy.

Figure 3. GLD/ daily