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:
Summary:
At Intellikon, we have no bias in any market. We are not thrill seekers, and we only take short positions when the statistical probabilities favor it. We also understand that market conditions are not always conducive to profits, and these are the are times when it is best to stand aside.
It is for these reasons why we are staying away from Gold in either direction… for now. Here’s why:
Update Dec. 30, 2013:
The indicator finally broke through the key $8.00 level on a move of over 2%,even as the GLD and GDX (gold miner) ETFs had limited gains on the day. It could be that large money is coming back into this market, thus driving up the price of the fund. Could this be a bottom on Gold? Look for a follow up post on this subject based on our quantitative analysis.
Update Dec. 20, 2013:
The indicator wasn’t able to break through the $8.00 barrier, and likewise, Gold experienced a massive slam-down to break down below $1,200 this week. Still waiting for the indicator to turn before trading Gold at all.
Update: Dec. 18, 2013:
Gold had a very volatile afternoon after the FOMC announcement, putting in a trading range of $40 from high to low.
So where did our indicator settle after all the dust settled? Up 2% (13 cents to $7.81, which is 19 cents shy of our $8.00 bullish line in the sand. This should be an interesting week.
Dec. 8, 2013
In April of this year, we were approached by a elderly lady who asked us to help with an investment portfolio left to her by her late husband.
The portfolio peaked in 2011 when it was worth in excess of $100,000 with capital invested of approximately $83,000, but since then the value had declined to $28,000 – a final investment loss of $52,000.
If you guessed that the portfolio was mostly invested in Gold, you would be correct.
At 7:00 AM this morning over 2,500 Gold futures contracts were sold into the market in a time span of a single second. We have seen volumes of this magnitude in Crude Oil, but not Gold.
Many would say that this is manipulation. Yes, we have read Harvey Organ and GATA and Zero Hedge even started following Ferguson’s blog when it first launched, so we are aware of the accusations from bulls and non-bulls alike. The explanations are certainly plausible, but our view of markets has always been agnostic: if ever we do see evidence of manipulation, our only real concern is how to profit from it.
1 week ago on September 23 we made a very bold call to go long Gold based on a new signal generated by our predictive algorithm.
At that time, Gold was bouncing along new 52 week lows trying to find a bottom, trading below its 200 day average, and the sentiment was overwhelmingly bearish… so who are we – some boutique algorithmic trading consulting firm north of the 45 – to go against the trend calling a Buy on one of the most heavily traded metals in the world?
This morning our Gold algorithm closed out its short position for 5% gain and went long at the open at $1,320. We notified everyone on the Gold email list in the morning and tweeted the signal in the afternoon.
We wouldn’t normally go long after such a large leg down (10% from the August 28 high) as we like to see price recover and put in a base, so some of us are cautious about buying at this point. We also like counting waves and fibs and other trade school techniques to confirm these black box signals, but all of that is baked into the historical patterns on price action, volume, and time. The patterns have been strong all year so we’re going to let the algorithm run on this one with a stop at $1,285. If it turns out to be right then we’ll package these signals into a Gold Price Predictor and publish it on the home page.
Earlier this week we posted and tweeted a warning to stay away from Gold. We did this in reaction to a strong historical pattern our computer algorithm identified which was rather sobering. Many investors know that the current trend in Gold is down, but the question is, how low will it go?
Much has been written about the fundamentals of Gold as an investment and we won’t re-hash it here, but the past year has shown a shift in these fundamentals and perceptions resulting in price volatility, confounding those still looking for a market bottom. This is where our algorithmic signals become a valuable tool in an investor’s arsenal.
The algorithm picked up a strong historical pattern on both the GLD ETF and Gold Futures (GC) contract, and the situation does not look good for either. We will be monitoring the performance this week, and if the pattern plays out we will post it here on Friday.
More to come so stay tuned…
