Remain Long Gold, Unless…

As of Wednesday, July 13, 2011, Gold traded to a new historical high at $1.578.50 / ounce. The up-trend line (denoted in blue) has been intact and defined the explosive upside move in Gold since October 2008, at which time the market had just constructed a bottom at the $700.00 region.

In addition, the 200- Day Moving Average (red) Line has been positively sloped since March 2009 – which coincided with the U.S. Equity markets posting its multi- year low.   


Photo: TheChartLab

    Overall, this has been one of the most dynamic text- book examples of a solid trend in recent history. Even some of the price corrections in the last 2+ years (when the price of Gold traded lower, either on profit taking or speculators taking an outright short position) were minor, and consistently held support at both the up-trend line and Moving Average Line simultaneously (see chart).

The fact that there is such a uniformed bullish consensus in Gold amongst most investors, makes me skittishly bearish at this time. However, the proof is in the facts, and since the Technical outlook remains positive at this juncture, I would recommend selling Gold only if a downside violation of the long term up- trend line occurred. Specifically if a monthly close (last trading day of the month- since we are utilising a monthly chart) below $1,422.00 is posted.      

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