Pitfalls of Gold Trading

One certainty in gold investing is that just about the time that gold appears to be attempting a technical bottom, a steeper drop can be witnessed at the open of the stock markets. Historically gold would need to hit above a milestone level and remain there for at least a full day. This would confirm a short-term bottom in the gold market. It looked as if it might just be on course to do that recently in Asian markets but no sooner had the scene of the usual gold suppression opened in the Dow Jones industrial average over here in the United States. Gold immediately fell. What is particularly strange about this take down was that it occurred in the face of a growing equity market. As always, gold has pretty much been trading in lockstep the S&P 500 set to see it moving lower as the equity futures moved higher as an indication that investors are up to the price suppression techniques.

Traditionally, just about every other commodity with the exception of gold and silver has moved higher. Corn and soybeans in particular looked as if they were trying to shrug off the forced retention related selling and confirm a bottom themselves. However, fund selling in those markets picked up as the remark they did all its highs. It should be mentioned here that while the index funds are bailing out of longs, some of the hedge funds are growing short and green that they're also doing and some of the other commodity markets. It is this continued flow of cell paper which is joined with fundamentally based on a the use prices as clear buy signals.

As usual, the mining shares both weakened alongside the broader equity markets. Suffice it to say about the gold shares at the HUI and the XAU you aren't levels commensurate with gold at a price under $400. Unless you believe gold is going to $300, is difficult to believe of much further downside in this sector. At some point even the greediest of bears come face-to-face with the arithmetic of risk and reward. The level on each year coincides with the highs made back in June 2002 and again in January 2003 and was a former double top which would finally be broken, so the index shot rapidly near the 260 level. Technically the 155 level should now stand as a floor of support for the HUI and gold. If you cannot hold for some reason then the HUI could drop to a ridiculous 100. That would effectively place it back at levels last seen in early 2002 when gold was trading at a price of $300! That would make it horrendously oversold and cheap. This is only further evidence that markets always overdo it both outside and on the downside, in the gold sector is exemplary of this problem.