Gold gained more than $30 over the weekend. And the bets are on the table, Bloomberg reports:
‘Hedge Fund Gold Wagers Defy Worst Slump in 33 Years…’
‘Official- sector purchases and demand in Asia will support bullion, Paulson & Co. said in a letter to clients last week, joining BlackRock Inc., the world’s biggest money manager, in predicting a rebound,’ according to Bloomberg.
So we have some of the biggest names in the business betting on a V-shaped recovery in gold. But I’m still sceptical…
First of all, what’s the rush? When have you ever seen any asset magically repair severe damage to its price in a matter of days? Gold is just now coming off its worst decline in decades. Give it a few weeks. Allow shorts a chance to cover. Reassess. Unless you’re a short-term trader, there’s no reason to attempt to play the bounce in gold just yet.
These big downdrafts can be tricky because they’re so abrupt. To the untrained eye, everything looks normal. Then one day, the trap door opens – and no one’s prepared to act. That’s when you tend to see the chatter about ‘weak hands’ rushing for the exit and the initial rush by the hopeful to buy more at lower prices. It happens in stocks. It happens in commodities. This is nothing new…
In reality, every single ‘weak hand’ was not flushed out of gold in just two trading days. The over-levered latecomers took the brunt of the damage (they always do). But I suspect that many nervous investors who were paralysed by the initial drop are waiting for a chance to get out on this bounce.
We’ll know for sure soon enough. As gold attempts to pull itself out of the hole this week, its price action will leave plenty of clues regarding its short-term future. My thinking has not changed. I believe gold will ‘rest’ between $1,350-$1,450 before beginning its next leg lower.
If you’re a bargain hunter, you don’t have to follow BlackRock and Paulson into this minefield. Lower prices are on the horizon…
If you’re looking for a shorter-term trade, oversold miners are your best bet. Look to play a snap-back rally – but keep your stops extra-tight.
for Markets and Money
From the Archives…
Why Too Much Data Might Actually Protect Your Privacy
19-04-13 – Sam Volkering
This Gold Bug Ain’t for Turning!
18-04-13 – Bill Bonner
Music for Contrarian Ears
17-04-13 – Dan Denning
Bring on the Gold Correction
16-04-13 – Bill Bonner
Why China’s ‘Population Pagoda’ Could Mean Slower Growth for Australia
15-04-13 – Dan Denning
Download this free report now and discover:
- How to Boost Your Wealth Four Ways in a Low Interest Rate World: Inflation is your biggest enemy when interest rates are low. Phil reveals his four–pronged strategy to overcome this… and shows you where to profitably park your cash in the coming decades.
- How the ‘Victorian Equilibrium’ Can Make You Rich: What if you could accurately predict where interest rates will travel in the future? You’d know the best time to lock–in rates on your mortgage repayments and save bucket loads of cash… or pick up the interest rate sensitive stocks most likely to rocket higher. As Phil reveals, if you understand the centuries old ‘Victorian Equilibrium’ discovered by an American history professor… you’ve got the next best thing to a crystal ball for interest rates.
- Why this $402 Million Decision Signals Low Interest Rates: In October 2014, UK treasurer George Osborne announced Britain will pay back debt used to finance the First World War — 96 years after the first shot fired. Phil reveals what this landmark decision means for long term interest rates both in Australia and across the globe and how this could affect your long term investing habits.
To download your free report ‘Why Interest Rates Could Stay Low for the 21st Century’ simply subscribe to Markets and Money for FREE today. Enter your email in the box below and click ‘Send My Free Report’.
You can cancel your subscription at any time.