Eyes on Gold

We are watching gold very closely today as it approaches a major trend line that goes back to early 2010.  The longer trend, which goes back to late 2008, has already given way.  However this flatter trend is still in tact.  If gold breaks decisively below this trend line and closes below $125 (GLD), we would likely swap our long position to a short position.   We do not hold cash, which means when an investment is no longer consider a buy, it then becomes a sell and we take a short position immediately.  There are a number of other signals that GLD may be weakening at these levels.  Although gold has sold off recently, the trends have still been fully intact until now.  The long term fundamentals for gold remain strongly bullish, however there is substantial room for a pullback at some point.  We would not hesitate to reverse to a long position quickly if gold strengthens, as the longer term direction is still up.

We made a call on shorting silver back on January 13th, and since that point SLV is down 6% (let's not count our money just yet).  Sliver and gold do not always trade in tandem, which is why we analyze those metal separately.  Silver also has outperformed by a significant margin, and therefore has more room to correct.

Below is a weekly chart of gold, which is available in our member section along with daily commentary and real-time updates on trading decisions.

UPDATE: Friday 1/28 - Gold has strengthened today and is holding above the uptrend line.