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The question many investors are asking themselves today is, just what happened to the price of gold?
Did the world change? Did the problems in Europe go away? Did all the states manage to find funding to cover their deficits?
No, none of that happened, but gold still dropped $100.
It's all about market perception and timing, two things we've talked about many times before on the Trader's Blog. I don't know about you, but I remember when gold was over $1,400 an ounce and all I could see on TV where ads from gold companies extolling the virtues of buying gold as it is real money. Since the fall, I expect we'll see fewer of these advertisements on TV and in print.
So what did happen to gold?
Well, for starters there were some key technical levels broken. If you're a gold trader, but not a technical trader, you really need to learn how to read charts and see what other traders are doing.
Secondly, there did not appear to be any other news to drive this market higher. When that happens, markets tend to fall under their own weight, and as many retail investors purchased gold, there was nobody on the other side of the market to support gold.
So the question is, is the move over in gold? That's a tricky one. I want to show you in today's video exactly how we're looking at this very emotional market. Every time we have created a video indicating that there would be some pullback in gold, we were bombarded by the gold bugs saying that we're crazy. When you see a market pullback as much as gold has, you have to have some respect for the market itself.
If we look at the price of gold today at approximately $1,330, it pretty much equates to what happened in the last 30 years when gold was trading at a high of $850 an ounce. If you factor in inflation over the last 30 years, gold is probably lower now than it was 30 years ago. So how good an investment is gold? I think gold is more of a barometer of fear than anything else. Clearly there are other investments in the marketplace that have better returns.
Let's get back to gold and what we think will happen. In this short video we analyze the market using our "Trade Triangles," the Williams%R, and the MACD indicator.
Enjoy the video.
All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub