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As gold was rocketing higher last year, I was unimpressed because I thought that it was not the sort of thing that could be sustained. Although I was wrong in predicting weakness for gold and gold stocks.
Equally wrong were the predictions of emboldened gold bugs. After hitting the magical four digit milestone in March, gold fell on hard times. If you’re like me, then you see the precious metal as just another trading vehicle, without the need to get into philosophical debates about its role in the world or economy.
According to historical seasonality, one of the best instances of such trading opportunities in gold is about to set up:
As you can see, for most of the year gold goes sideways, flopping around and making everybody dizzy. Then towards the end of August and the beginning of September, it rockets up almost vertically only pausing a bit to finally close the year strong.
That’s certainly what happened last year:
But remember, while this is a rhythm observed over time and smoothed out in an average, it does not mean that every year has to follow the same script. That beautiful chart showing long term seasonality hides a lot of cross-currents as well.
The AMEX Gold Bugs Index (HUI) is in a good technical position, right at support levels to launch another leg up to the 500’s:
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