Gold is getting the bounce we anticipated – what’s next?

On March 30 we warned to stay away from Gold (‘Right now, the best way to play Gold is to stay away‘).  At the time, Gold was trading at $1295 and subsequently dropped $30 to the $1375 range.

We also called for Gold to re-test $1300, and today it did just that.

Our original post outlined some very key factors that would make us go long Gold.  Here is an update on how those factors are playing out:

1.  Our Favourite Indicator, The DMP Resource Class fund:  On March 30 we wrote:

NAVPU is currently at $9.06, indicating that the

Our fund indicator is trying to stay positive

mass panic selling has subsided, but it could not get much above that key level.  If the fund drops below $9 into the $8 range and holds, we would consider this to be bearish, (Recall in our original post that these funds can potentially trade below fair value if mass redemptions occur), but for now we would simply consider this Indicator as “Not Bearish”

The fund did trade lower into the $8 range, but then snapped back to $9.03 as of Friday.  This indicator is currently “Bullish” for as long as it remains above $9.

2.  Capital Flows:  We rated this as Neutral in our last post.  The next 13F reporting deadline in May, so no material change is expected before then, however we also use a volume-weighted relative strength indicator to uncover possible buying, and this is showing a possible bottom in the selling.  Overall, capital flows into gold and Gold miners continues to be “Neutral”

3.  Intellikon Predictive Algorithms:

Gold Futures: The Algorithm is currently long.

In our last post we showed clear algorithmic Sell signals in both the GLD and GDX exchange traded funds.  These signals continue to show downside.  The Gold Futures algorithm indicated the re-test of $1300, and generated subsequent buy at $1990 last Wednesday  April 2nd.  Given the historical accuracy of this algorithm rate this as “Bullish”, however until the other algorithms switch to long on GLD and GDX, our overall outlook is “Neutral”

Conclusion:

The most daring of tradings may want to play this bounce for the short term, however the longer-term outlook continues to indicate volatility as a best case scenario, and further downside in the worst case.


The content contained in this blog represents the opinions of the authors who may or may not hold long or short positions in securities of various companies discussed in the blog based upon the authors' views. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied solely upon in making investment decisions, ever. It is intended for the entertainment of the reader, and the authors. In particular this blog is not directed for investment purposes at US Persons.
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