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.
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
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:
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”
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.