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.

To recap where we are on this run:

9/3 – Algorithm goes short

9/17 – we post and tweet a warning to stay away from Gold

9/21 – we post a follow-up to our warning, citing a strong historical pattern detected going back to January. We state “we will not go long until it generates the next Buy signal”

9/23 – Algorithm generates a Buy signal: long with stop at $1,285

UPDATE: 9/29 – Gold spiked up on the open on US Gov shutdown (among other) fears. Heavy inverse correlation to USDJPY which gapped down on open. Position up 1.4% so far ($1,840 profit per contract)

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